[Financial Channel/Comprehensive Report] As the U.S. stock market has seen a recent tug of war between bulls and bears, the Market Intel Desk of JPMorgan Chase has made an important shift, adjusting from the original "tactical caution/neutral" to "tactically bullish." The report pointed out that the trading desk has captured market turning points many times in the past two years, and the increase this time means that the team believes that the short-term market risk-return ratio has significantly improved.
Foreign media reported that J.P. Morgan's shift was mainly based on its observation of the current fundamentals of the U.S. economy and businesses. The report pointed out that recent macro data have performed better than expected, consumers have shown resilience, and corporate profits have remained strong. In addition, the market has not been extremely crowded, so the trading desk believes that the current fundamentals of U.S. stocks are still supportive.
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From a consumer perspective, JPMorgan Chase believes that American households still have a certain financial buffer. The report pointed out that the total size of U.S. household checking accounts has increased from about 1 trillion US dollars before the new crown epidemic to nearly 6 trillion US dollars, indicating that household balance sheets are still relatively abundant. In addition, Bank of America data shows that about 20% of the recent tax refund funds have been consumed, about 47% have been put into deposit accounts, about 26% have been used to repay debts, and about 7% have been invested, which means that some funds have not yet been used.
In terms of corporate profits, the current revenue growth of S&P 500 constituent stocks is about 11%, profit growth is about 28%, and net profit margin exceeds 14.5%, reaching a record high. The report also pointed out that the high-yield bond default rate is currently about 2.1%, lower than the 25-year average of 3.2%, and there are no obvious signs of deterioration in the credit market.
In addition to fundamentals, market position is also an important factor in JP Morgan's adjustment of its views. The bank's tactical position monitoring indicators show that the overall market position remains neutral. The previous high position pressure in the semiconductor sector has also been released after the recent market adjustment. In other words, the market is not in a state where a large amount of funds are highly concentrated and positions are extremely long.
Technology stocks are also a focus of observation. The report pointed out that semiconductors, the Korean market, the Nasdaq 100 Index and technology ETFs have all experienced a certain degree of technical correction recently. Among them, the recent decline of the semiconductor sector reached negative 1.8 standard deviations, the Korean market was negative 2.3 standard deviations, the Nasdaq 100 was negative 1.6 standard deviations, and the technology ETF was negative 1.8 standard deviations.
According to the JP Morgan trading desk, if there is no substantial change in fundamentals, the technical oversoldness of some technology stocks, coupled with the return of funds, may become a factor for the market to find support again. As a result, the trading desk has now shifted from tactically cautious/neutral to tactically bullish.
However, this does not mean that the market is risk-free. The report pointed out that JPMorgan Chase is still concerned about factors such as the re-escalation of armed conflicts in the Middle East, sharp increases in bond yields and bond volatility, and substantial reversals in the main technology market. In particular, the relationship between U.S. bond yields and the valuation of technology stocks is still a variable that needs to be observed by the market in the future.
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