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JPMorgan expects 'a more challenging macro backdrop for stocks' in 2H23

Published 2023-06-22, 09:26 a/m
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JPMorgan strategists reiterated their bearish stance on U.S. equities following a very strong rally in the first half of the year.

Aggressive monetary tightening by the Federal Reserve is catching up with the economy and the full effects are yet to be felt, they wrote in a client note. Accordingly, deteriorating business conditions and slowing consumer demand will weigh on the economy.

“In equities, absent pre-emptive Fed easing – vs. Fed dots that imply two more hikes by year-end – we expect a more challenging macro backdrop for stocks in 2H, with softening consumer trends at a time when equities have re-rated sharply,” the strategists said.

They also warned about “increasing investor complacency.”

“In short, the risk of another unknown unknown resurfacing appears high,” they further noted.

Similar to Kolanovic, Morgan Stanley also reaffirmed its bearish stance recently. In a note to clients on Sunday, they said:

“We find it hard to get on board with the current excitement and narrative supporting it. In other words, if second half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct. If not, many investors may be in for a rude awakening given the very big reach for risk we are seeing.”

S&P 500 is up 16.1% year-to-date.

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