Dear Reader, JPMorgan's global economic research team just published a note titled: "They will know I am the Lord when I lay my vengeance on them." The quote comes from Ezekiel 25:17. It was popularized in "Pulp Fiction" by fictional hitman Jules Winnfield — portrayed by Samuel L. Jackson. Led by Bruce Kasman, JPMorgan's economics team employs the chilling language to characterize the Federal Reserve's "decisively hawkish shift" in the wake of recent hotter-than-expected inflation reports. While the economy has been solid and massive tailwinds have provided a buffer to downside risks, the economists caution that "…resilience alone is not enough to deliver a return to above-potential growth in the coming quarters… With inflation pressures still building, however, the risks remain heavily skewed to the downside… Persistently high inflation also challenges our view that central banks remain forgiving deities." And because the Fed's only way of affecting the economy and inflation is through financial markets, investors hoping for a rally in risk assets face a problem in the near term. You may have noticed that the tone of the last several emails have taken a slightly darker turn. Simply put, the Fed seems pretty hellbent on bringing inflation down. And as Powell said before, "There could be some pain involved in restoring price stability." I think the economy and the stock market are biased to the upside in the long run. We have a long history of recessions, depressions, geopolitical conflicts, financial crises, pandemics, and even inflation scares. And yet, the economy and stock market have never failed to recover losses and come back even stronger. But in the near term, everyone needs to be managing their expectations. This is not the environment where you should expect a sustained rally in stock prices. | 
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