J.P. Morgan is urging investors to watch for signs of stagflation even though the global economy has not yet shown a significant slowdown. James Sullivan, the bank’s managing director and co-head of global fundamental research, made the remarks on CNBC’s Squawk Box Asia.
He said that if oil remains above $100 a barrel for an extended period, it could mark the beginning of a stagflationary phase. At the same time, he stressed that such a scenario would not necessarily mean a sharp deterioration in economic growth.
According to Sullivan, the combination of reasonable economic growth and higher inflation is reviving the stagflation debate on a scale not seen since the 1970s.
He also said record issuance in the AI industry and a growing number of governments running record-level deficits would “absolutely have an impact on pricing,” especially in an environment of weaker demand. He pointed as well to a mismatch between supply and demand.
Sullivan noted that more long-term investors are looking to the corporate space rather than the government sector. In his view, that shift also matters for how markets price assets.
He added that the effects of El Niño and the conflict in the Middle East are further weighing on the global economic outlook. One reason behind one of the first coordinated central bank tightening cycles in many years, he said, was exactly that backdrop of rising food and energy prices.
Sullivan said core inflation has remained relatively sticky, and J.P. Morgan does not see that environment reversing quickly in the short term.
