JP Morgan Says 3% US Growth Possible But Not Sustainable

The U.S. is capable of reaching of 3 percent GDP this year, but growth is likely to slow after that, strategist David Kelly told CNBC on Tuesday.

Productivity “really is the key,” said Kelly, chief global strategist at J.P. Morgan. The unemployment rate could “go down to its lowest level since 1969. Three-point-four percent by the end of the year. But if we get there, that’s really as low as it’s going to go. So, growth will have to tapper out at 2 percent next year.”

“In other words, we can get 3 percent growth, but it is a one-hit wonder,” Kelly said in the interview on “Squawk on the Street.” “One year of 3 percent and 2s for as far as the eye can see.”

The Commerce Department reported last month that the U.S. economy grew at its fast pace in more than two years in the third quarter, expanding at a 3.2 percent annual rate

Kelly also said it’s reasonable to expect the stock market to have a correction after 2017’s record run. The Dow, S&P 500 and Nasdaq had their best years in four years.

“The average correction in about any given year is 14 percent,” Kelly said, “and we’ve been very far from that in the last year. But it’ll get more interesting as the year goes on.”

Also on “Squawk on the Street,” strategist Jim Paulsen said the stock market rally could be “even more impressive” than last year. But he also predicted a correction in 2018.

“There’s certainly a lot of positive momentum,” said Paulsen, chief investment strategist at the Leuthold Group.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza