According to a top JPMorgan strategist, the stock market is likely to erase its 2022 losses in the second half of the year as inflation eases and the US economy sidesteps a recession. Marko Kolanovic, who has remained bullish in stocks despite sharp falls in recent months, said in a note to clients on Thursday that he and his team expect the S&P 500 to end the year at 4,800 points. That’s 27.7% above the broad market index’s close on Wednesday and a few ticks above its all-time closing high of 4,796.56 on Jan. 3. “Although geopolitical tensions in Europe pose a significant risk to the cycle, we believe a diplomatic solution in 2H22 is likely and should improve the inflation environment. JPM Economics also forecasts a significant slowdown in inflation later this year – which will effectively reduce the likelihood of a US recession and a drop in earnings. This backdrop combined with near-record low investor positioning offers what we believe to be an increasingly attractive risk/reward trade-off in 2H,” Kolanovic wrote. JPMorgan remains bullish on the energy sector, which has weakened recently after spending most of the outperformed dramatically this year, but also suggests buying other cyclical stocks versus defensive stocks.”Anything but a recession is likely to catch most investors off guard, especially after a broad correction leading to an average decline.” of stocks about 80% of the way to previous recession lows,” Kolanovic wrote. Recession fears have been growing among investors in recent weeks, fueled by stubbornly high inflation readings, rate hikes by the US Federal Reserve and signs of slowing demand in areas like housing, Kolanovic prognosis However, he indicated that PCE core inflation – the Fed’s preferred price measure – will fall to an annual rate of 2.9% in the second half of the year, which could allow the central bank to moderate tighter monetary policy. “Our forecast assumes that the Fed will be largely successful in staging a soft landing at least through the end of next year,” Kolanovic wrote. Despite this optimism, Kolanovic said risks remain on the downside for growth and upside for inflation, with a recession more likely further ahead. JPMorgan models suggest a 63% chance of a recession in the next two years and 81% in the next three years. – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2022/06/23/jpmorgan-midyear-outlook-shocker-sees-sp-500-roundtrip-to-new-record.html JPMorgan shocker for the mid-year sees the S&P 500 ride to a new record