Investors betting on further US equity gains over the coming months will be disappointed, according to strategists at JPMorgan Chase & Co. Their peers at Morgan Stanley disagree.
The diverging outlooks signal rising uncertainty about whether the record-rally in stocks can continue after the S&P 500 posted gains in six of the past seven months, despite interest rates prevailing at a decades-high level. Equities have run so hard that strategists have been unable to keep up their forecasts, with benchmarks recovering from every pullback since October.
“We see the market upside capped during summer due to the inconsistency between the consensus call for disinflation, and at the same time, the belief in no landing and in earnings acceleration,” a JPMorgan team of strategists led by Mislav Matejka wrote in a note to clients.
Meanwhile, Morgan Stanley’s Michael Wilson says his bull case is in play, for now. Rising government debt will continue to fuel spending and inflate asset prices in the short-term — including equities — as long as the bond market doesn’t signal any tension.
JPMorgan’s strategists are now Wall Street’s most prominent bear after Morgan Stanley’s Wilson capitulated on his negative outlook. Matejka’s colleague, Marko Kolanovic has acknowledged their pessimistic view has hurt JPMorgan’s model portfolio allocation.
