JP Morgan Predicts The End Of Covid, A Strong Economy, And $125 Oil
- JP Morgan believes that things are looking up for the global economy next year and consumption will remain strong for years to come
- The bank highlights inflation, the Chinese economy, and the transition from a pandemic to an endemic disease as the three economic factors to watch moving forward
- This prediction for a vibrant economy supports the banks earlier claim that oil prices could hit $125 per barrel next year
Next year could lay the foundation for "a far more vibrant economic environment" and COVID transitioning from a pandemic to an endemic disease, JP Morgan said in its Outlook 2022, titled 'Preparing for a vibrant cycle.'
According to the investment bank, household net worth is at all-time highs in many developed countries, and excess savings are elevated. Consumption will likely be strong for years amid strong labor market conditions and the capacity to take on more debt, JP Morgan's strategists said in the report for 2022.
"Although we see clear potential for a more vibrant economic cycle, the environment is also fraught with cross-currents. We are confident the economic expansion will continue through 2022, but its strength will likely be determined by the monetary response to inflation, the relative success of Chinese policymakers in rebalancing their economy, and the pace of the transition from a pandemic to an endemic disease," the bank noted.
A vibrant economy means robust demand for oil, and JP Morgan even said last week that crude oil prices could soar to $125 per barrel in 2022 and $150 in 2023 due to OPEC's limited capacity to boost production.
The Omicron variant that has spooked markets over the past two weeks could be the beginning of the end of the pandemic, JP Morgan strategists Marko Kolanovic and Bram Kaplan wrote in a note last week, as carried by Bloomberg.
If the new variant turns out to be less deadly, it would fit the historical patterns of virus evolution. This would be bullish for risk markets as it could suggest the end of the pandemic is in sight, the strategists said.
Bill Gates also expressed optimism that the end of the pandemic could be in sight at some point next year.
"I am hopeful, though, that the end is finally in sight. It might be foolish to make another prediction, but I think the acute phase of the pandemic will come to a close some time in 2022," Gates wrote in his 'Year in Review' blog post on Tuesday.