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David Kelly, the chief global strategist at J.P. Morgan Asset Management, is making the case that the US is entering a sustained period of disinflation. His argument rests on two pillars: reduced tariff pressures and the expectation that oil will flow more freely through the Strait of Hormuz as geopolitical tensions ease.
The disinflation thesis
Kelly’s view isn’t a sudden revelation. It’s the product of months of analysis that has been building through J.P. Morgan’s 2026 economic outlook. Back in June, the firm projected that CPI inflation could decrease through the year, contingent on improvements across several key areas: energy prices, tariff effects, shelter costs, and wage growth.
Then there’s oil. The Strait of Hormuz, that narrow waterway between Iran and Oman through which roughly a fifth of the world’s petroleum passes daily, has been a recurring source of supply anxiety. Tensions involving Iran earlier in 2026 temporarily pushed oil prices higher, adding upward pressure to inflation forecasts. Kelly’s view is that this pressure is fading as supply normalizes.
In a CNBC interview on August 7, Kelly analyzed the broader economic landscape alongside the July jobs report, weaving together how labor market resilience, consumer spending patterns, and these disinflationary forces interact. His LinkedIn commentary from mid-June flagged wages and rents as additional factors supporting the medium-term disinflation case. Wages are growing, but at a moderate pace. Rents, which have been one of the most stubborn contributors to elevated CPI readings, appear to be cooling as well.
What the Fed is watching
Kelly’s emphasis on US economic resilience is worth noting here. He isn’t painting a picture of disinflation driven by economic weakness. Instead, his thesis describes an economy that remains fundamentally strong while specific cost pressures recede.
Broader market implications
J.P. Morgan’s mid-2026 outlook incorporates the combined impact of tariff resolution and energy price normalization as key inputs.
The risk, of course, is that Kelly’s assumptions don’t hold. Geopolitical situations around the Strait of Hormuz could deteriorate again. Trade policy could reverse course with a single executive order. And shelter costs, while showing signs of moderation, have a way of surprising to the upside in tight housing markets.
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