Jonathon Fite.

“The U.S. consumer has always been strong, and confidence is still very high.”

— Marianne Lake, chief financial officer, JPMorgan

The markets have had a strong recovery off the Christmas Eve lows. After having fallen 20% last fall, the Dow and S&P 500 are up about 13% and 16%, respectively, so far this year.

Fears of a global slowdown leading to an imminent U.S. recession have faded. We wrote last month that the Federal Reserve’s pause of further rate hikes is supportive of economic growth and market performance.

In our fund, we are positioning for a potential correction after the 2020 elections but believe conditions are supportive for a healthy market between now and then.

Comments by executives at JPMorgan Chase, one of the world’s largest banks, indicate a recession could be pushed off even further. Marianne Lake, CFO, made the above comment on a call about first-quarter earnings.

CEO Jamie Dimon stated last week that the U.S. consumer is in good shape. Most people who want a job have one and they have paid down debts.

Lots of people are returning to the workforce, indicated by improving labor participation rates. And the average U.S. household carries 30% less debt than they did 10 years ago.

Dimon also confirmed that companies have plenty of money, which they are investing in capital expenditures to improve the productivity and efficiency of their businesses. While this spending has moderated sequentially last quarter to this quarter, overall capital expenditures are still up year over year.

“Since business confidence and consumer confidence are both rather high,” Dimon said. The expansion, in its 10th year, “can just as easily go on for years. There’s no law that says it has to stop.”

There are plenty of economic risks, including geopolitical issues, lower liquidity, policy missteps in China or escalating trade tensions. So there could be a confluence of events that somehow causes a recession, but Dimon underscored it may not be in 2019, 2020 or 2021.

The April jobs report confirms JPMorgan’s view. After a lackluster jobs report last month, the jobs report showed 196,000 non-farm jobs were created in March, exceeding the consensus forecast.

Looking at data across January, February and March — to smooth out some of the fluctuations —the economy added 180,000 jobs on average each month during the first quarter. This is reflective of a strong employment market supported by a healthy economic outlook.

Taking off our rose-colored glasses, the report did have some data to keep an eye on. For example, one trend worth watching is the recent decline in weekly hours worked. Growth in total hours worked, including overtime, is negative year over year.

Manufacturing wages, especially in nondurable goods, have decelerated markedly. This seems to correspond with a peak and recent decline in the total number of manufacturing employees.

Perhaps the reshoring efforts of the Trump administration have reached their limit? Or, given the wage increases over the last couple of years, perhaps this is just a natural pause.

Even so, murmurs of an impending trade deal with China continue to circulate. A deal should continue to be supportive of the markets.

President Donald Trump may try to wrap this up over the next few months to claim a victory, but Europe may soon come under his trade agenda focus. While the Democratic Party’s eventual nominee for president will provide a template for Trump to compare his domestic policies against, the restrictive trade policies of the European Union may wind up being his foreign policy foil heading into the election.

In the meantime, we find comments from the JPMorgan CFO most relevant for investors today: “Underlying drivers across our businesses continue to propel us forward and the economic backdrop feels increasingly constructive. Client sentiment has recovered and recent global data shows encouraging momentum.”

Jonathon Fite is a managing partner of KMF Investments, a Texas-based hedge fund. Jonathon is a professor with the G. Brint Ryan College of Business at the University of North Texas. This column is provided for general interest only and should not be construed as a solicitation or personal investment advice. Comments may be sent to email@

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