JPMorgan: The observed upward trend in the US stock market may end as early as the first quarter of 2023, as the economy will begin to experience deferred effects from raising rates by the Fed, analysts at JPMorgan Chase & Co bank believe.
« We have been waiting for a recovery in the stock market since the fourth quarter of last year against the backdrop of a halt in growth in government bond yields, the opening of the Chinese economy, and expectations of falling gas prices, » the bank’s analyst team led by Mislav Matejka said in a report. « We still believe that the first quarter will be strong, but we do not count on the emergence of sufficient justification for the second round of the rally. »
According to experts, the indices may reach their highs for the entire year in the first quarter.
American stocks have been actively rising in price since October last year. Thus, the S&P 500 jumped 12.2% from October lows, according to Dow Jones Market Data. Growth was provided by expectations that the Fed will stop raising rates in the first quarter of 2023.
However, many strong statistics on the US economy, including data on slowing inflation and a strong increase in the number of new jobs, weakening corporate profits, and rising government bond yields forced market participants to revise their forecasts for the Fed’s monetary policy.
The market sees a 76% chance of a 25bps rate hike at the March meeting, and a 24% chance of a 50bps hike, CME FedWatch data shows. Investors have also only now begun to fully factor in a rate hike above 5% in current quotes, although the Fed leaders gave such a forecast last year.
In a previous post, The rally in US stock indices has continued since the beginning of the year on the back of worsening forecasts for corporate profits and macroeconomic indicators, which creates significant risks for the stability of financial markets.