JPMorgan's "Bullish" Reversal: The Bank Is Once Again Betting on a Rise in the U.S. Market
Economic activity and corporate earnings reports will outweigh the risks of high inflation and the Fed's tight monetary policy
JPMorgan wisely adjusted its position ahead of the summer stock sell-off and is now returning to a "bullish" outlook / Photo: Tang Yan Song/Shutterstock
The trading desk at investment bank JPMorgan Chase & Co. has changed its outlook on the U.S. stock market from tactically neutral to “bullish,” according to Bloomberg. The bank’s traders, led by Andrew Tyler, attributed this to higher-than-expected economic activity, resilient consumer demand, and steady growth in corporate earnings.
Details
"We are now seeing a more favorable situation for the markets: bond yields are stabilizing, and oil prices will most likely continue to fall, albeit with some fluctuations," Tyler said.
The short-term drivers for the stock market will be the U.S. jobs report, expected on Friday, October 2, followed by the Consumer Price Index (CPI) and the U.S. Federal Reserve’s (Fed) next interest rate decision on October 28, Tyler explains in a research note. Economists forecast that the September jobs report will show an increase of 90,000 jobs—following an unexpected jump of 162,000 in August, according to Bloomberg.
Growth in the technology sector is likely to be driven by semiconductor stocks, and the “Magnificent Seven” (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla) could outperform the sector as a whole, noted a JPMorgan strategist. “The AI theme is likely to persist, and we like to maintain our positions in this area,” he added.
“In the short term, we have a positive outlook on the technology sector, and the expected financial results are likely to provide it with additional support,” Tyler wrote. “For a sustained rally in cyclical sectors, a ‘bullish’ steepening of the yield curve is necessary. Excluding AI-related assets, our favorites are banks. This is driven by the economic recovery, a potentially steeper yield curve, and a favorable outlook for capital markets.”
Tyler explained that the bank's analysts still view the technology sector as the basis for long positions, but will no longer combine them with short positions in the Russell 2000 small- and mid-cap index.
“Given the risk of a short squeeze (a situation where traders who bet on a decline are forced to buy back assets in a hurry due to rising prices, which pushes prices even higher), — Oninvest) caused by falling oil prices and bond yields, it’s worth using derivatives to capitalize on this squeeze,” he added.
Context
Tyler, who correctly adopted a tactically cautious stance in early June ahead of a multi-week sell-off in the U.S. stock market, also remained cautious in late August, Bloomberg notes. This came after a “hawkish” speech by Federal Reserve Chairman Kevin Warsh in Jackson Hole, against the backdrop of which traders increased their bets on interest rate hikes this year.
According to Bloomberg, the S&P 500 index has not fallen by 1% or more for 41 consecutive trading sessions (through Friday)—the longest period of stability since October 2025. The last time the index suffered significant losses was on July 29, the day the Fed announced its interest rate decision, when it fell 1.5%.
This article was AI-translated and verified by a human editor
