JPM: “We See Increasing Risk Of Sell-Off In The Near Term”
by Tyler Durden
ZeroHedge.com
Mar 6, 2017
First it was Goldman, then Citigroup, now, completing the trifecta of suddenly bearish big banks is JPMorgan, whose US equity strategist Dubravko Lakos-Bujas writes that while the fundamental backdrop remains supporting, the “short-term downside risk” in the S&P is increasing. JPM released the note after the S&P hit the bank’s year end price target of 2,400. Unlike Bank of America, JPM has not rushed to raise it year-end bogey, yet.
As JPM writes, the S&P 500 reached the bank’s price target of 2,400 last week. The market is up 11% since the US election driven by intra-cycle expansion, pro-business agenda of the new administration, and improving sentiment.
Despite the challenging path forward for fiscal legislation with passage and efficacy far from certain, business and investor confidence is high. It is increasingly evident that the market has been pricing in pro-growth policy reforms. The beneficiaries of corporate tax reform (JPAMTAXP +16% vs S&P 500 +11%), deregulation (JPAMDREG +24%), and infrastructure spending (JPAMINFR +24%) have significantly outperformed since the US election. At the same time, the largest US importers (JPAMIMPR +3%) and companies sensitive to wages (JPAMWAGE +3%) have underperformed. Over the medium-term, progrowth policy reforms and solid fundamentals should likely result in higher equity values.
However, the Croatian strategist notes, “in the near-term we see increasing risk of a sell-off due to more hawkish Fed rhetoric at a time when investor positioning is stretched and equity volatility is likely to rise from low levels.”
The Rest…HERE
