2021 has been a record year and investors in the US do not believe this is about to end. From JPMorgan Chase indicate that there are no conditions for a big sale, according Nikos Chrysoloras at Yahoo Finance.
“The conditions for a large sell-off are not in place at this time given already low investor positioning, record buybacks, limited systematic amplifiers and positive January seasons,” wrote strategists led by Dubravko Lakos-Bujas. “Investor positioning is too bearish: the market has led to aggressive central bank and bearish narratives of omicron too far”.
While the S&P 500 climbed to another record, the recovery has recently been fueled by a small group of mega-capitalization companies, reminiscent of tech stocks bubble from the beginning of the century. With the economic rebound that followed the pandemic-induced recession now past its peak, some fund managers have warned that the next stage of the cycle is a correctionas central banks and governments reduce stimulus measures to control rising inflation.
For JPMorgan strategists, however, the “extreme dispersion of stocks and record concentration within stocks” is a very cautious indicator, rather than an impending sell-off. “Investors have been treating megacaps as safe havens the pseudo-bonos”, the strategists wrote.
“If anything, the downsizing in smaller companies offers investors attractive entry points to reopen stocks, such as travel and hospitality, as well as energy and e-commerce, as inflation normalizes and concerns about the aggressiveness of the Fed declines, ”strategists said.
The bullish outlook echoes that of the strategists of Goldman Sachs, who also said earlier this month that the bullish rally does not point to a major decline imminent.
“Increasing concentration is not a reliable indicator from market peaks, “said strategists at JPMorgan. “The largest companies in the S&P 500 today have a proven track record of generating organic growth, greater pricing power and superior return on equity.”
JPMorgan is trading at $ 157 and Ei’s indicators are mostly bearish.