J.P. Morgan Analyst: Optimistic on U.S. Stock Market Pullbacks as Buying Opportunities, Key to Watch is S&P 500 Breaking Below 5,500 Points
The U.S. stock market experienced a substantial sell-off this week, with related technology stocks plunging to a two-year low. Market risk aversion is gradually escalating, as many investors are concerned that a series of fiscal and trade policies implemented by President Donald Trump will have a significant impact on the global economy.
David Lebovitz, a global strategist analyst at JPMorgan, has raised the probability of a U.S. economic recession from 15% to 20%. Although the market risk premium has increased, Lebovitz remains optimistic about the current situation, believing that the economic fundamentals are still stable. While this wave of decline may continue, he maintains a positive outlook.
He suggests buying into technology and financial stocks should the S&P 500 index fall below 5,500 points. According to Bloomberg, despite increased market volatility, Lebovitz believes the current decline primarily affects overvalued and speculative assets, while the overall credit market has not shown signs of collapse, and economic data still supports economic expansion. He recommends considering buying U.S. technology and financial stocks at lower prices, as the long-term prospects for these industries remain optimistic. JPMorgan forecasts that the S&P 500 index is expected to reach 6,400 points by the end of this year, representing a 14% upside from current levels.
Economic data remains resilient, with a stable labor market and corporate earnings reports. Lebovitz further stated that despite the gloomy market sentiment, U.S. economic data has not deteriorated. For instance, the employment report for February was stable, and corporate earnings for the fourth quarter of 2023 performed well. He believes the economy is still in a “steady state” and has not shown signs of a “cliff-like decline.” However, uncertainty regarding the Trump administration’s trade and immigration policies continues to lead to increased risk aversion among investors, further exacerbating market volatility.
Technology stocks fell sharply, U.S. Treasury yields declined, and Bitcoin fell below $80,000. The U.S. stock market started the week poorly, with the Nasdaq index recording its largest single-day drop of 4% since 2022 on Monday (3/11), and the S&P 500 index also plummeting by 2.7%. U.S. Treasury yields decreased, Bitcoin dipped below $80K, and about ten institutional players delayed issuing corporate bonds due to market weakness. The uncertainty in the market has led Wall Street to reassess investment strategies. Earlier this year, the market widely anticipated that the Trump administration’s tax cuts and deregulation policies would be beneficial for the stock market, but now, with increased uncertainty regarding trade and immigration policies, the investment atmosphere has become more cautious.
JPMorgan advises diversification, shifting toward high-yield bonds and overseas markets. In response to market uncertainty, Lebovitz stated that asset allocation is currently being adjusted, with recommendations for investors to moderately reduce equity positions and shift towards high-yield bonds. Furthermore, JPMorgan has expanded its investment scope to markets such as China and Japan, while ending the underweight position in European markets. However, there are still many bulls in the market; for instance, UBS Global Wealth Management has previously stated that while they have increased hedging operations, they have not sold off stocks and remain optimistic about the growth potential of AI and technology industries.
Although the market may experience short-term volatility, JPMorgan believes that the U.S. economy is unlikely to undergo a cliff-like decline. Lebovitz emphasizes, “We do see a slowdown in economic growth, but currently, there are no signs of collapse.” In summary, investors should pay attention to whether the S&P 500 index falls below 5,500 points and seize the entry opportunities presented by the market downturn. JPMorgan recommends focusing on U.S. technology and financial stocks while moderately diversifying investments into overseas markets to reduce market risk and capitalize on potential rebound opportunities.
(CPI leads market rise, Bitcoin at 83K, ETH still down)
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