Morgan Stanley stubbornly short: The US stock market seems to have "overlooked" many risks
JPMorgan Chase believes that the U.S. stock market has overlooked many risks and is still trading at record highs. The bank's chief market strategist stated that the stock market has decoupled from the bond market, with investors lowering their rate expectations. Risks include political factors in emerging markets, the surge of MEME stocks and cryptocurrency trading, high inflation, and signals of economic slowdown. JPMorgan Chase advises investors to prepare for potential stock market volatility
Intelligent Finance APP noticed that JPMorgan Chase is still sticking to its defensive stance towards the market. The bank's chief market strategist, Marko Kolanovic, stated on Monday that the stock market has overlooked many risks.
Kolanovic mentioned that the company is maintaining an underweight position in stocks in its model portfolio, while increasing positions in commodities and cash. He supported this stance, stating that last Friday the stock market and bond market further "decoupled," with yields surging as investors lowered rate hike expectations following a stronger-than-expected May nonfarm payrolls report. The stock market rebounded intraday but ultimately fell back.
"In addition, the stock market seems to be overlooking too many risks," he said. These risks include political factors that "disrupted" several emerging markets last week. The unexpected election results in India and Mexico markets caused a scare.
Kolanovic also mentioned that risks include the resurgence of MEME stocks and crypto trading, which "may signal a bubble," high inflation, and signals of economic slowdown.
"Despite the abundance of risks, the stock market is still trading near record highs, with increased investor confidence and positions," he stated.
In another report, JPMorgan Chase stated that investors should prepare for potential stock market volatility on Wednesday, when CPI data and the Fed's interest rate decision will be announced. Andrew Tyler, head of JPMorgan Chase's US market intelligence department, stated that the options market expects the S&P 500 index to fluctuate "in either direction" by around 1.3%-1.4% by Friday.
Following the release of the May jobs report last Friday, JPMorgan Chase abandoned expectations of rate cuts starting in July, pushing back the first rate cut expectation to November