JPMorgan Lists Four “Red Flags” Why It Is Starting To Sell Stocks

Monday, August 14, 2017
By Paul Martin

by Tyler Durden
Aug 14, 2017

While most banks have in recent weeks expressed concerns about the recent, near record high levels in the S&P – which is now 67 points above Goldman’s year end price target of 2,400 – few have been willing to go out on a limb and announce they are short the market, and that the bull market is now over (unlike Gartman who on Friday staked his reputation that the “Bull market has come to an end” only to unleash another rally in the S&P in the next two days).

Overnight, JPM’s Misla Matejka has done just that, and in his latest equity strategy note writes that JPM “continues to see the risk-reward for equities as unattractive” for 4 main reasons: i) complacency seen in VIX and in HY spreads could unwind further, ii) EPS momentum is deteriorating, iii) valuations are “outright expensive”, and iv) liquidity will be turning.

If the JPM strategist had left it at that, it would have been notable as it would be one of the very few, unhedged bearish recos on Wall Street. He did not, however, and said that after the early periof of turbulence, markets will continue rising, effectively nullifying his warning because what’s the point of selling just to have to buy again a few weeks or months down the line, or as Matejka put it the “medium-term fundamental view remains that equities are in an upcycle and that the potential consolidation should be used as another good entry point.”

Hedging aside, here are the details of Matejka’s short-term bearish call, who writes that “we have been very bullish on equities in 1H, but think they will be consolidating during the second half of the year. Equities performed strongly in 1H and the key positive catalysts moved behind us. Now that SXXP is down 4% since May, where to from here? We believe a continued weakening in USD will keep helping EM & commodities (OW) and any rise in Bund yields will help Eurozone Banks (OW), but we think broader equity markets are likely to continue consolidating.”

The Rest…HERE

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