JPMorgan's Trading Desk Shifts to 'Tactically Bullish' Stance on Stocks Amid Tech Earnings Surge and Economic Growth
JPMorgan’s trading desk has adjusted its stance on stocks, now adopting a “tactically bullish” outlook, as stated in a note released on Tuesday.
Previously holding a cautious view since the second half of January, analysts admitted their stance had been overly conservative. Concerns stemmed from doubts about MegaCap Tech companies’ ability to surpass high market expectations, limited positioning advantages, and the potential for a market pullback following a significant three-month rally.
Tech Titans Triumph
While JPMorgan’s overall perspective on stocks remains bearish, the trading desk acknowledged underestimating the earnings potential of tech giants like Meta and Amazon. Meta notably surged 20% following its impressive earnings report last Friday.
An essential shift in their analysis is Big Tech stocks’ observed “decoupling” from bond yields. Despite recent increases in bond yields prompted by Powell’s hawkish remarks, tech stocks have continued to advance. Over the past five days, the Nasdaq index has risen by 1.74% even as 10-year bond yields exceeded 4%.
Limited Market Impact Expected
Analysts anticipate limited market-moving events this week, suggesting that even hawkish statements from the Federal Reserve may not significantly affect the top technology companies, potentially leading to a slower but still upward trajectory for the index.
Additionally, robust economic growth persists, evidenced by a strong jobs report last week indicating the addition of 353,000 new jobs to the US economy. This follows positive consumer spending and GDP figures.
JPMorgan’s trading desk emphasized that the ongoing above-average growth should contribute to positive revenue expansion. While acknowledging the risk of margin compression, they view it as more of a company-specific concern.
Looking beyond the immediate market dynamics, analyst Marko Kolanovic advises investors to prioritize cash over stocks. Citing concerns over the impact of interest rate fluctuations on economic activity, weakening consumer demand, geopolitical tensions, and stretched asset valuations. Kolanovic maintains a cautious stance on risky assets and the broader macroeconomic outlook.
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