JP Morgan Bank warned investors against rushing behind stocks, especially technology stocks, which have recorded a significant rise this year.
According to Arabia Net, JPMorgan urged investors not to believe in the continuation of the current rise in the stock market, especially with the good start of the market at the beginning of the year.
The Wall Street giant wrote in a note to clients: The stock rally that started last October, which we had hoped was driven by peak bond yields/CPI, China reopening, and lower European gas prices, is unlikely to be confirmed quickly, given the big picture.
JPMorgan strategist, Mislav Matica, said: “The first quarter is probably what we saw as the highest point in the market.
Matika recommended that investors reduce their exposure to stocks - which he described as overvalued - and focus on more defensive sectors of the market. The strategist warned remarkably about the performance of technology stocks, amid their significant rise this year.
Matika added: The big positives are not over yet, but it is clear that they are no longer new now, and have been priced into the shares.
The strong rally across the major indices so far this year has surprised many market watchers, especially given that the Federal Reserve is eager to raise interest rates again as it continues to try to combat pesky inflation.
Several Fed members, including Atlanta Fed President Rafael Bostick and Minneapolis Fed President Neel Kashkari, have come out since the last Fed meeting with warnings that interest rates may be directed higher than investors expect. currently.
Meanwhile, US companies are going through a disappointing earnings season that does not justify market progress in 2023.
Big household names like Apple, Meta, Snap, Microsoft and Starbucks reported weak fourth-quarter earnings and gave cautious commentary going forward.
PepsiCo CFO Hugh Johnston also said last week that he wouldn't be surprised if there was a mild recession in the US this year, according to Yahoo Finance.
Ultimately, Matika believes, the market needs a reality check.
And the strategist wrote: It seems that the market is betting that the new cycle has begun, but there has been no reset in the main variables, profits, the labor market, capital expenditures, and others, adding: We do not believe that companies will be able to maintain margins at current levels.
