JPMorgan Economist: Recession Odds Lower in Trump's First Term
Amid the Dow Industrials hitting a tenth record high since Donald Trump won the election, some investors are growing anxious over the rapid rise. However, JPMorgan Chief Economist (NYSE:JPM) Anthony Chan said investors shouldn’t be concerned.
“In the first year of a presidential term… you certainly don’t get a lot of correction. Only 4% of all the market corrections we’ve gotten since 1946 occur in the first year of that term. If you look at bear markets… We’ve had 13 bear markets since the 1940’s, only one bear market or 8% of the bear markets occur in the first year,†he said during an interview with the FOX Business Network’s Maria Bartiromo.
Even though more than 60% of all recessions occur in the first term of a presidency, according to Chan, fiscal policy will reduce the risk of an economic downturn.
“We are going to have fiscal policy in a world where we have a 4.6 [percent] unemployment rate, so this means the probability of a recession is much lower and the equity market is going to do a lot better,†he said.
Treasury Secretary Nominee, Steve Mnuchin, last week, told the FOX Business Network he expects 3% to 4% percent growth over the next couple of years.
While Chan says, this is a “little aggressive,†reducing regulations, and lowering the corporate tax rate, will drive earnings and lead to 2% to 3% growth .
“If you lower the corporate tax from 35% to 15%, as it’s been promised, it will raise the S&P 500 earnings over a 12-month period between 19% and 20%. Even if you go down to 20% it will raise S&P 500 over a 12-month period between 10% and 11% above whatever the consensus is,†he said.