Labor supply continues to recover (the labor force participation rate for prime aged workers is the highest it has been since 2002), and worker earnings are finally outstripping inflation. The pile of excess savings that households accumulated during the pandemic has been slowly melting away, but research from our own JPMorgan Institute shows that they still have more money in the bank than they did in 2019. Millennials are even starting to move out of their parents’ basements despite a housing market plagued by historically poor supply and low affordability.

Funds from the Bipartisan Infrastructure Bill are flowing into the economy from projects as grand as upgrading the Golden Gate Bridge in San Francisco to as humble as adding traffic lights to Federal Road in Brookfield, Connecticut.

The Inflation Reduction and CHIPs Acts are encouraging investment in manufacturing facilities, and artificial intelligence applications are already set to boost productivity at businesses from auto dealerships to e-commerce platforms. Microsoft, one of the most valuable companies in the world, soared to a new record high this week after announcing prices for its suite of AI products.

This isn’t to say that risks have disappeared. Manufacturing activity is weak. Interest rates are higher. Banks have tightened lending standards and will likely have to fight to retain deposits. China’s reopening has been sputtering, and European economic data has been disappointing. But this year has already exceeded almost everyone’s expectations, and it seems like there is still room for things to keep getting better, not worse.

Investment implications: Let the good times roll

Markets, as they tend to do, didn’t wait for the vibe shift to adjust. Throughout the year, equity markets have been rallying because the outlook was improving. After a nearly 20% gain so far this year for global equities, we aren’t surprised that many people feel like they have “missed it.”

But instead of asking “how long can the good times last,” we think investors should instead consider that for the U.S. economy and markets, “the good times” are much more common than the bad.

Since World War II, the economy has expanded almost 90% of the time, and bull markets last about four times longer than bear markets. Being close to all-time highs is also an insufficient reason to shun equities. The average one-year return from when the S&P 500 is within 5% of an all-time high is 7.6%, which is only slightly lower than the 9% average from any random starting point.

If anything, the vibe shift is the latest illustration that sticking with an investment plan is the most repeatable way to achieve investment goals. Not many thought that 2023 would end up being a great year for investors, but if the gains so far merely hold, it will be. Let the good times roll.

All market data from FactSet and Bloomberg Finance L.P., 7/21/23.

DISCLOSURES

Small capitalization companies typically carry more risk than well-established "blue-chip" companies since smaller companies can carry a higher degree of market volatility than most large cap and/or blue-chip companies.

International investments may not be suitable for all investors. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Some overseas markets may not be as politically and economically stable as the United States and other nations. Investments in international markets can be more volatile.

Diversification does not ensure a profit or protect against loss.

The Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Bloomberg Eco Surprise Index shows the degree to which economic analysts under- or over-estimate the trends in the business cycle. The surprise element is defined as the percentage difference between analyst forecasts and the published value of economic data releases.

The NASDAQ 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.

The MSCI World Index is a broad global developed markets equity benchmark designed to support: Asset allocation: Consistent, broad representation of the performance of developed equity markets worldwide, without home bias.

The Bloomberg Aggregate Bond Index or "the Agg" is a broad-based fixed-income index used by bond traders and the managers of mutual funds and exchange-traded funds (ETFs) as a benchmark to measure their relative performance.

The NYSE FANG+ Index is an equal-dollar weighted index designed to represent a segment of the technology and consumer discretionary sectors consisting of highly-traded growth stocks of technology and tech-enabled companies such as Facebook, Apple, Amazon, Netflix, and Alphabet's Google.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views
expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.

RISK CONSIDERATIONS

• Past performance is not indicative of future results. You may not invest directly in an index.
• Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.
• The price of equity securities may rise or fall due to the changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Equity securities are subject to 'stock market risk' meaning that stock prices in general may decline over short or extended periods of time.
• The prices and rates of return are indicative, as they may vary over time based on market conditions.
• As a reminder, hedge funds (or funds of hedge funds) often engage in leveraging and other speculative investment practices that may increase the risk of investment loss. These investments can be highly illiquid, and are not required to provide periodic pricing or valuation information to investors, and may involve complex tax structures and delays in distributing important tax information. These investments are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any such fund. For complete information, please refer to the applicable offering memorandum.
• Structured products involve derivatives and risks that may not be suitable for all investors. The most common risks include, but are not limited to, risk of adverse or unanticipated market developments, issuer credit quality risk, risk of lack of uniform standard pricing, risk of adverse events involving any underlying reference obligations, risk of high volatility, risk of illiquidity/little to no secondary market, and conflicts of interest. Before investing in a structured product, investors should review the accompanying offering document, prospectus or prospectus supplement to understand the actual terms and key risks associated with the each individual structured product. Any payments on a structured product are subject to the credit risk of the issuer and/or guarantor. Investors may lose their entire investment, i.e., incur an unlimited loss. The risks listed above are not complete. For a more comprehensive list of the risks involved with this particular product, please speak to your J.P. Morgan team.
• Additional risk considerations exist for all strategies.
• The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  
• Structured products are complex debt obligations of a corporate issuer the return of which is linked to the performance of an underlying asset. They are significantly riskier than conventional debt instruments and may not be suitable for all investors.
• Investment in alternative investment strategies is speculative, often involves a greater degree of risk than traditional investments including limited liquidity and limited transparency, among other factors and should only be considered by sophisticated investors with the financial capability to accept the loss of all or part of the assets devoted to such strategies.
• Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.

IMPORTANT INFORMATION

All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

Bonds are subject to interest rate risk, credit and default risk of the issuer. Bond prices generally fall when interest rates rise.​ Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.