We believe the Fed is willing to tolerate inflation at these levels: JPMorgan's Jacob Manoukian

• The bond market sell-off is getting attention, but the 10-year yield is only up 5 basis points since early August.
• Rising bond yields could indicate a stronger growth environment or the impact of AI productivity, allowing the economy to handle higher rates.
• J.P. Morgan's thesis is that the Fed will tolerate current inflation, and 1-2 rate hikes won't fundamentally alter the market regime.
• An inflation overshoot regime likely means elevated bond market volatility but a continued strong earnings growth and equity rally.
• Driving nominal GDP growth, even with some inflation tolerance, is seen as a politically less costly way to manage the debt-to-GDP ratio and boost corporate earnings.

Jacob Manoukian of J.P. Morgan Private Bank discusses the bond market sell-off, suggesting it could signal stronger economic growth and AI productivity, enabling the economy to handle higher interest rates. He believes the Fed is willing to tolerate current inflation levels, which, alongside nominal GDP growth, could support a continued equity market rally despite bond market volatility.