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JPMorgan thinks that the benchmark index is well poised for the next surge looking at the monetary support from the Fed. JPMorgan strategist asked investors to look at businesses whose stocks move in economic cycles.
If you a stock market investor, it’s not the right time to book profits as per JPMorgan Chase & Co (NYSE: JPM). On Tuesday, September 29, the Wall Street banking giant JPMorgan stated that the S&P 500 (INDEXSP: .INX) can rise up to 10% by the next year. With hefty monetary support, the recovery for the benchmark index is “ahead of expectations”, added the bank.
Throughout this month of September, the markets have remained choppy and volatile. The S&P 500 is already trading over 6% down from its high on September 2. Speaking to CNBC’s Squawk Box Europe, JPMorgan’s head of equity strategies Grace Peters said:
“We think certainly that the U.S. markets can make new highs over the next [year]. We can see around a 10% upside over a 12-month view.”
To make the most of the market returns, Peters suggested that investors should add stocks with cyclical economic exposure to their portfolios. Peters told about identifying stock whose price move in tandem with economic cycles. Being more specific, JPMorgan asked investors to look at businesses that are seeing “structural growth”.
This includes health-care innovation and the rapid digital transformation we witnessed in 2020. It also asks to keep an eye on environmentally driven trends. Peters also suggested industrial and construction material stocks as they would be the first to recover with the economic recovery.
JPMorgan: S&P 500 to Cross 3600 by the End of 2020
While the S&P 500 has already recovered to its pre-COVID levels, JPMorgan expects another 6% jump by the end of 2020. The Wall Street giant said that the benchmark index will cross 3600 levels by the end of this year and 3750 by September 2021. Betting on equities over other asset class, Peters said:
“We think certainly that the U.S. markets can make new highs over the next 12 months … we still think the earnings picture for the U.S. corporate is very strong … and also it’s that broader economic backdrop when we look at equities relative to other asset classes”.
Speaking about the immediate headwinds of the U.S. General Elections in November 2020, Peters added that the outcome is “unlikely to materially drive share prices” longer-term. The strategist concluded it based on historical market and election trends from the 1930s.
Earlier this month in a note to clients, JPMorgan wrote that the market recovery is ahead of expectations citing strong support from the Federal Reserve. “As for COVID-19 sensitive companies, 2Q likely marked the bottom with earnings to see a sustained recovery as the economy rebounds, and consumer and corporate behavior gradually normalize,” the bank said.
Peters’s latest comments come when global markets are worried about the second wave of COVID-19. The UK has already hinted at the possibility of another national lockdown citing the sure in COVID-19 cases. However, President Trump has assured that the U.S. won’t be shutting down the economy for the second time.