JP Morgan tried to solve the riddle over the firmer equities despite recession risk during late Thursday. The US bank initially termed the firmer shares as short covering as folks re-assess the macro environment. Many believe that the Fed re-centres from inflation to growth and if growth continues to disappoint that brings the end of the tightening cycle earlier
Following that, better than expected earnings from MegaCap Tech and retail bid were cited as the catalysts for the equity run-up. JP Morgan also said, “A ton of money is on the sidelines, so light volume and low liquidity. This is exacerbating the move higher but we have not seen many institutional investors chase this rally. Instead, many believe this is another bear rally.”
While providing the outlook, the US bank mentioned, “At some point, that money on the sidelines is pulled into the market but many investors think we need to retest, and make new lows.”
“In terms of Tech outperformance, if we have seen the highs in yields (3.47% on June 14) and we're going to be in a low growth environment then MegaCap Tech is arguably the best long irrespective of the shape of the yield curve,” the JP Morgan mentioned additionally.
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