Stock Strategy Mizraf Mateka JPMorgan

Stock Strategy Mizraf Mateka JPMorgan

The gap between Fed forecasts and stock market levels widens... to narrow them, improvements in corporate earnings will accelerate...

기업실적개선이 따라와주어야 주가가 지속해서 상승가능하다는 분석

◼️ In terms of leadership, the U.S. and Japan are outpacing other markets, growth is outpacing value, and large-cap stocks are outpacing small-cap stocks again in all major regions. We expect this leadership style to remain in place for some time until there is a break or reset in the business cycle. While reflation should be the background for value stocks, raw materials, low-quality, small-cap stocks, emerging or overseas stocks to see more sustainable gains, we see the opposite as possible. Against this backdrop, recent improvements in risk compensation in the eurozone have realized returns on U.S. versus Eurozone bonds.

◼️ bonds basically expect bond rates to fall in the second half of the year, but inflation swaps are picking up and bond-period primias are back in negative territory, suggesting much of the relief in bond markets over inflation risks has been lifted. The yield gap between Fed futures and stock markets is increasingly widening as a result. In November and December, stocks were up nearly 30% from their October lows last year, driven by expectations of the Fed's pivot and the belief that they could already cut in March. At its October low, it expected the Fed to cut 80 basis points in 2024, and when the doves peaked in January, they expected to cut as much as 180 basis points, but have now shifted their expectations back to 80 basis points. Stocks are ignoring the most recent pivot, which could be a mistake.

◼️ What the market is currently assuming is that growth will begin to accelerate in the second half of the year. In this regard, we note that the 2024 earnings forecast is still not being raised. It also points out that the market is too complacent about downside risks, with recession probabilities too low at the 7th percentile level and cyclical/defensive stocks at record highs between '09 and '10 when the global simultaneous recovery was underway after the GFC. This pattern is likely not applicable this time around and could rather act as a headwind. The next time bond yields fall, the market will not respond as positively as it did in November-December, which could return to a more traditional correlation between yields and stocks.

OW Japan

OW UK

Neutral EM vs DM

Neutral Eurozone

Neutral US

Neutral RoW