Eurodollar University (Jeff Snider)

JP Morgan Just Confirmed the Worst-Case Scenario

JP Morgan has officially dismissed the so‑called “Goldilocks” scenario, signaling that it now expects a negative growth shock to hit the U.S. economy. The bank’s latest outlook marks a sharp departure from earlier Wall Street optimism that growth would slow without triggering a recession. The revision rests on a suite of labor‑market indicators that have been deteriorating since early 2024. Hiring has stalled, job openings and quit rates have collapsed, and the SAM rule – a three‑month unemployment‑momentum gauge – crossed its 0.5‑percentage‑point threshold, a historically reliable recession warning. Analysts also note that the headline U‑3 unemployment rate understates weakness because discouraged workers are exiting the labor force. In the video, the host quotes JP Morgan’s phrasing that “Goldilocks is leaving the building,” and points to early warnings from Japanese carry traders and the SAM rule that were largely ignored. He also cites corporate earnings calls that now speak of “challenging consumer environments” and “affordability pressures,” echoing the bank’s new stance. For investors and policymakers, the shift implies tighter credit conditions, lower asset‑price expectations and a higher probability of Fed rate cuts being delayed. Companies may face reduced demand as households, already stretched by stagnant wages and higher energy costs, cut discretionary spending, potentially deepening a self‑reinforcing slowdown.