Podcast Summary: Notes on the Week Ahead

Episode: The Latest News and the Economic Outlook
Host: Dr. David Kelly, Chief Global Strategist, J.P. Morgan Asset Management
Date: April 13, 2026

Episode Overview

This episode features Dr. David Kelly's thoughtful assessment of current economic data, the market's reaction to global events (notably the Iran conflict), and an outlook on U.S. growth, inflation, rates, and earnings. Dr. Kelly opens with personal reflections on the evolution of news consumption and draws parallels to the investment world's ever-present focus on the "latest news." He then walks listeners through the latest consumer trends, housing situation, capital spending, labor market developments, inflation update, and implications for investors.

Key Discussion Points & Insights

1. On the Obsession with News and Its Investment Implications

• [00:04–02:10] Dr. Kelly reminisces about Dublin’s old evening newspapers and draws a parallel between society’s news obsession and investment strategy:
  • Quote: “Despite the demise of evening papers, the public has retained a fascination with the latest news. And in the case of investing, such an obsession is quite logical. Yesterday’s news should already be priced in, but today’s news…may still provide some useful information.” (01:40)

2. State of the U.S. Consumer

• Positive Indicators:
  • Vehicle sales in March hit 16.3 million units (annualized). (02:25)
  • Robust spending on premium services like airline travel and restaurant bookings, aided by stock market gains.
• Negative/Headwinds:
  • Tax refunds are below expectations; average refunds barely up ($350) despite tax breaks. (03:10)
  • Higher gas prices offset any incremental gain from refunds.
  • Tariff rebate checks are unlikely due to Supreme Court decisions and war-driven budget expenses.
  • Consumer sentiment has hit “a record low,” but this has “never been a reliable predictor of actual consumer behaviour.” (04:12)
• Outlook: Slow but steady growth in consumer spending—projected “0.8% this year and 1.7% in 2027.” (04:30)

3. U.S. Housing Market

• [04:31–06:05]
  • Government housing data lags behind, while more current realtor data shows a “relatively stagnant market.”
  • Rising rental vacancy rates due to weak demographics.
  • Home buying remains very unaffordable for new buyers due to high prices and sticky mortgage rates.
  • Gradual improvements in affordability expected—but “a very slow process.”
  • Homebuilding will not be a significant engine of growth this year or next.

4. Capital Spending & Industrial Activity

• [06:06–07:14]
  • Capital spending remains a positive for the economy, notably:
    • Increased energy infrastructure spending due to the Iran conflict (higher oil prices).
    • Tech firms’ “fevered pace” of investment in AI infrastructure; “existential opportunity… existential threat” for mega-cap tech.
  • February Manufacturing Orders up 9% annualized, but price increases dilute the real impact.
  • Inventory accumulation may add GDP volatility due to supply disruptions (tariffs, war).
  • Inventory costs and higher interest rates will likely make inventories a “slight drag on growth.”

5. Trade & Fiscal Developments

• [07:15–08:20]
  • International trade “unlikely to impact growth in a meaningful way.”
  • Any decline in the trade deficit in 2025 will be modest.
  • Increased military spending may offset federal domestic spending cuts.
  • Overall Growth Outlook: Real GDP growth seen averaging 1.5–2% for 2026 and 2027.

6. Labor Market Developments

• [08:21–11:10]
  • March jobs: Payrolls up by 178,000, unemployment down to 4.3%.
  • Downward revisions for prior months; many positive indicators due to weather and strike resolution rather than underlying strength.
  • Wage growth slowing: “…just a 0.2% month over month gain…year over year increase from 3.8% to 3.5%—lowest since March 2021.” (09:50)
  • Unemployment rate drop was due to a significant decline in labor force rather than job creation.
  • Labor force participation rate at multi-year lows; foreign-born workforce shrinking.
  • Most indicators point to a “very low hire, low fire labour market”: workers are hard to find, but wage pressures are mild and layoffs are rising, especially with increased mentions of AI as a cause.

7. Inflation & Geopolitical Impacts

• [11:11–16:15]
  • March CPI: 0.9% monthly spike led by a 10.9% jump in energy prices; annual inflation jumps to 3.3% from 2.4%.
  • Iran war escalation weighs on global energy markets; U.S. threatens to blockade the Strait of Hormuz.
    • Dr. Kelly’s strategic take: “Every day the strait is closed increases the economic damage…the U.S. Administration will be under tremendous pressure to reopen it.” (13:45)
  • Customs duties dropped 20% as IPA tariffs were struck down and replaced with lower, temporary blanket tariffs.
  • Housing costs (rents, owner’s equivalent rents) are rising more slowly and should help inflation fall.
  • Inflation Outlook: CPI to near 4% YoY by summer, then “fall back below 2% by March of next year and stay close to 2% for the rest of 2027.” (15:45)

8. Corporate Earnings Season

• [16:16–17:03]
  • First big week for Q1 results: 28 S&P 500 firms reporting.
  • Analysts see a 12.6% YoY gain in operating earnings per share.
  • “Remarkable how US Companies in general have been able to expand their margins even as consumers remain deeply pessimistic and workers hesitate to ask for wage increases.” (16:50)

9. Monetary Policy Expectations

• [17:04–18:07]
  • Fed officials expected to hold firm on policy; no near-term rate cut.
  • “We expect the Fed to defend its independence aggressively and only ease when the economy is threatened by recession or inflation is trending below 2%…no rate cut until the end of this year…further cuts could be forthcoming in 2027 if both growth and inflation fall below 2%.” (17:15)
  • Global central banks likely to hold off on hikes due to sluggish demand and geopolitical risks.

10. Investment Takeaways & Market Strategy

• [18:08–19:34]
  • The environment is “dominated by uncertainty emanating from Washington and the Middle East.”
  • Strong US profit/lower inflation outlook supports US stocks and bonds.
  • Cheaper international equities and a likely weaker dollar improve the case for global diversification.
  • Memorable closing: “Markets remain vulnerable to geopolitical shocks, underscoring the importance of diversification and underweighting the frothiest parts of global financial markets.” (19:30)

Notable Quotes

• “Yesterday’s news should already be priced in, but today’s news…may still provide some useful information.” (Dr. Kelly, 01:40)
• “A fall in consumer sentiment has never been a reliable predictor of actual consumer behaviour…” (04:12)
• “Home buying remains very unaffordable for younger buyers…this is a very slow process.” (05:45)
• “Mega cap tech companies continue to see AI both as an existential opportunity if they win the AI race and existential threat if they don’t.” (06:44)
• “While good workers are hard to find, dispirited workers are not demanding wage increases, limiting any risk of an inflation impulse.” (11:05)
• “Every day that the [Strait of Hormuz] is closed increases the economic damage…[the US] Administration will be under tremendous pressure to find a way to reopen it.” (13:45)
• “We expect a year over year CPI inflation to fall back below 2% by March of next year and stay close to 2% for the rest of 2027.” (15:45)
• “No rate cut until the end of this year…further cuts could be forthcoming in 2027 if both growth and inflation fall below 2%.” (17:25)
• “Markets remain vulnerable to geopolitical shocks, underscoring the importance of diversification and underweighting the frothiest parts of global financial markets.” (19:30)

Important Timestamps

• [00:04] — Podcast introduction and personal anecdote on news (Dublin, 1970s–80s)
• [02:13] — Analysis begins: American consumer and economic update
• [04:31] — Deep dive into housing data and trends
• [06:06] — Capital spending and manufacturing update
• [08:21] — March jobs report and labor market analysis
• [11:11] — March CPI, energy prices, and Iran war impacts
• [16:16] — Start of corporate earnings season
• [17:04] — Fed and global monetary policy outlook
• [18:08] — Investment implications and closing strategy

Tone and Context

Dr. Kelly’s delivery remains calm, analytical, and slightly philosophical, as he weaves personal history together with measured economic insights. The tone is one of caution and realism—a recognition of persistent risks, but also of the resilience in the U.S. corporate sector and the advantages of thoughtful, diversified investing.

This episode serves as a robust briefing for investors, market watchers, and anyone tracking the economic impact of geopolitics, inflation dynamics, and U.S. policy ahead of a potentially volatile market week.