JP Morgan is bullish on the S&P 500 index, focusing on the performance of tech giants like Microsoft and key inflation data

According to the Zhītōng Finance APP, on Wednesday local time, Morgan Stanley issued a clear buy signal for the US stock market, as its US tactical position monitoring indicator showed that clients' risk exposure to US stocks had reached a level that reflects an attractive structure of the S&P 500 index. A new report from the bank pointed out that in the past four weeks, the S&P 500 index, which experienced similar position changes, rose by an average of about 3% in the following 20 days, while the average increase for all time periods was about 1%.

This week, the US stock market rose due to strong corporate earnings, helping the S&P 500 index break free from three consecutive weeks of decline. The market's focus was on large tech companies, especially the earnings of Meta Platforms Inc (META.US) and the earnings of Microsoft (MSFT.US) and Alphabet (GOOGL.US) to be released after Thursday's close. The latest data on personal consumption expenditure price index will be released on Friday, and investors will look for signs of easing price pressures.

Andrew Taylor of Morgan Stanley wrote in the report, "The tactical rebound seems set to continue, with the key being the earnings of large tech stocks and personal consumption expenditure data released this week." He added, "If these data perform well, the market may become overheated, but for now, the market seems to be starting to buy on dips."

Taylor also mentioned that the current market situation is similar to August and October last year when US stocks also experienced a rebound.

Although it is not uncommon for different teams at Morgan Stanley to hold different market views, this difference in opinions has been particularly evident since last year. For example, in August last year, the trading desk team predicted that the S&P 500 index would hit new highs, while Chief Market Strategist Marko Kolanovic remained bearish at the time.

It is understood that Kolanovic recently stated that the recent three-week decline in the US stock market is the beginning of a sell-off, with macroeconomic risks such as rising US bond yields, a stronger US dollar, and higher oil prices exacerbating the sell-off.

The strategist said that although the earnings announced by US companies this week may temporarily stabilize the market, it does not mean that the stock market has emerged from its difficulties. He believes that factors such as complacency in stock market valuations, persistent high inflation, reduced expectations of a rate cut by the Federal Reserve, and overly optimistic profit prospects have all increased the downside risks for the stock market.

In a report to clients, he pointed out, "Market pullbacks may continue. The market concentration is very high, and the expansion of positions is usually a dangerous signal, with the risk of a reversal." A market pullback is typically defined as a decline of 10% or more.

It is worth noting that Marko Kolanovic's views on US stocks have not materialized for two consecutive years. He remained bullish for most of 2022, and then took a bearish stance when the S&P 500 index rose by 24% last year