Keep pulling the thread on Bloomberg Surveillance.
The price of computer software and accessories in the Consumer Price Index rose 14% year-over-year in the April report, a significant reversal from its historical trend of -5% per year.
The Producer Price Index for semiconductors has increased by 25-26% year-over-year.
Macquarie predicts that headline inflation in the U.S. is likely to reach 4% later this year.
Macquarie has been forecasting since the start of the year that the Federal Reserve's next interest rate move will be an increase, potentially occurring as early as 2026.
The conflict in the Middle East is causing major supply chain disruptions analogous to a "mini-COVID" event, affecting not just energy but also nitrogen for fertilizer and materials for plastics.
In the short term, AI may be contributing to inflation through the energy usage and resource requirements of data center build-outs.
Across the J.P. Morgan Private Bank platform, approximately 20% of client assets are currently held in cash.
Clients of J.P. Morgan Private Bank are holding high cash balances in anticipation of adding to risk assets during a market pullback.
Inflation is the biggest risk that clients of J.P. Morgan Private Bank are concerned about.
Despite high inflation concerns, clients of J.P. Morgan Private Bank do not have portfolios structured for a higher inflationary environment.
J.P. Morgan Private Bank is advising clients to add real assets, infrastructure, and hedge funds to their portfolios to perform better in an inflationary environment.
J.P. Morgan Private Bank expects 5-7% returns in equities over the next 12 months.