JPMorgan’s trading division has reportedly turned tactically bullish on US equities and expects the US S&P 500 to reach a new high by year-end. Bond-market trends and the start of earnings season are behind the view.
JPMorgan’s trading division says bond selling has gone too far and argues that equities are positioned to rebound toward year-end. It favours technology, financials and cyclical stocks, with semiconductors its top pick. US long-term interest rates have turned lower from elevated levels, and it says stabilising yields will support the market’s risk tolerance.
The third-quarter earnings season begins this week. Following results from PepsiCo and Delta Air Lines, earnings announcements from banks including JPMorgan, Goldman Sachs and Morgan Stanley are expected to gather pace. The release of the minutes of the Federal Reserve meeting will also provide clues about the interest-rate path and attract market attention.
The US S&P 500 posted a slight weekly decline but rose on Thursday and Friday, recording a closing level of 7,722.72%. The Nasdaq Composite reached a new intraday high, while the Dow closed higher for the entire session. This week’s movements are said to have been influenced by yield trends and weakness in economic indicators.
JPMorgan strategists rate emerging markets favourably relative to other regions and expect European cyclical stocks to lead the recovery. The fourth quarter is traditionally considered seasonally strong, while trends in the ISM index and fluctuations in the oil market have also been cited as factors to watch.