JPM's Michele: See Growth Slowdown, But Not Recession Amid $100 Oil

Bob Michele, JPMorgan Asset Management Global Head of Fixed Income, joins Bloomberg Surveillance to discuss current macroeconomic conditions amid the backdrop of the Iran war, as Federal Reserve officials voice growing concern over potential fallout. "At these levels, there's no obvious solution," Michele says, adding that even amid oil hitting $100 a barrel, "We don't see recession, we see growth slowing down a lot from where we had it, inflation going up a little bit," putting the Fed back in wait-and-see mode. Meanwhile, three Fed officials on Thursday expressed growing anxiety over the US economic outlook due to the war in the Middle East, with one policymaker saying the spike in oil prices had shifted the balance of risks for now, leaving inflation as a bigger concern than employment. Federal Reserve Governors Lisa Cook and Michael Barr, and Fed Vice Chair Philip Jefferson seeing a shift in the balance of risks. Michele speaks with Tom Keene and Paul Sweeney. - Wall Street traders drove stocks lower ahead of the weekend on concern that a protracted war in Iran will keep oil prices elevated, fueling a simultaneous increase in inflation and a slowdown in growth.

The nearly 1% drop in the S&P 500 put the gauge on course for its longest streak of weekly losses since 2022. The Nasdaq 100 fell into correction territory after a 10% decline from its peak. Brent hovered around $111. A drop in Treasuries stalled after yields hit the highest levels of the year. The US and Israel bombed several nuclear targets and steel facilities in Iran on Friday, as Tehran continued to launch strikes across the Persian Gulf and rebuffed President Donald Trump’s increasingly insistent demands to end the conflict.

The attacks came after Trump pushed back his deadline for Iran to agree to reopen the Strait of Hormuz or face strikes on its power plants.

“Even though the move might temporarily avoid escalation of the war between the US and Iran, it has prolonged the uncertainty around the length of the disruption to global oil supply,” said Ian Lyngen at BMO Capital Markets. “Reports that the US is sending additional ground troops to the Middle East have added to fears of escalation.”

The Wall Street Journal reported the Pentagon is considering sending as many as 10,000 additional soldiers to the Middle East. Iran’s government believes there’s a high likelihood the US will attempt to take over Kharg Island, according to an official from the Islamic Republic.

“The logic of ‘escalation to de-escalate’ continues to play out, and this will dampen risk appetites ahead of the weekend,” said Marc Chandler at Bannockburn. The diplomatic dissonance between the US and Iran has dismayed investors, and risk appetite could not withstand the “fog of war,” according to Doug Beath at Wells Fargo Investment Institute.

“Despite this week’s volatility, we still expect that the time pressure on the US will be a major factor in the war’s ultimate duration,” he said.

As the war in the Middle East drives up gasoline prices, data showed US consumer sentiment slid to a three-month low in March and year-ahead inflation expectations jumped.

Economists raised their estimates for US inflation through year-end, while trimming consumer spending, growth and employment projections as the war in Iran drives up fuel costs, according to the latest Bloomberg monthly survey.

“The combination of inflation and recent strong labor data leaves the Federal Reserve with no justification to cut rates, which, in turn, strengthens the US dollar and causes widespread volatility in equities, bonds, and gold,” said Craig Johnson at Piper Sandler.

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