JPMorgan Warns About Chasing Rally in Stocks
JPMorgan (JPM:US) equity strategists led by Marko Kolanovic told the broker’s clients to fade the ongoing stock market rally.
S&P 500, the benchmark U.S. stock market index is hovering around 4100, after failing to stage a breakdown and a test of 2022 lows, despite the Federal Reserves’ determination to fight inflation.
“For a rational investor, we think this makes little sense and that most of the inflows over the past 2 weeks were driven by systematic investors, short squeeze and a decline in VIX. Any decline in yields is not a sign that the Fed is about to bring a punch bowl for tech stocks, in our view, but rather a sign that recession probability has increased,” the analysts wrote.
The index is up around 7% year-to-date with JPMorgan analysts noting several headwinds, including a banking crisis, oil prices rising again, as well as a rising rate environment. On the same day, the bank’s CEO Jamie Dimon warned that the banking crisis is “not yet over.”
"While this is nothing like 2008, it is not clear when this current crisis will end," he said in an annual letter to shareholders."Even when it is behind us, there will be repercussions from it for years to come."
As a result, the banking giant sees stocks plunging lower in the coming months, as the U.S. entering a recession is now seen as a “baseline” scenario.
These remarks and projections from JPM don’t bode well for Congress members who have been betting on the stock market recovery.
Congressman Ro Khanna invested upto $1 million in the closing months of 2022 in the SPDR S&P 500 ETF Trust (SPY:US). Although his positions are in the green, it remains unclear whether Rep. Khanna will hold and wait for a stronger market recovery or cash in on the profits.
