So, the Market Outlook Is Cloudy, Huh? Not to JPM

The firm has a sunny view for stocks up ahead, differing from the likes of Goldman and BofA.

Much of Wall Street is doing a Jeremiah these days—referring to the Old Testament prophet who spied trouble ahead. In light of the Delta outbreak and other snags, many expect a market downdraft, often an outright correction (10% off the high).

But not JP Morgan. Its chief US equity strategist, Dubravko Lakos-Bujas, just told clients in a note that the firm views “these risks as well-flagged and in some cases overdone.” 

The ongoing coronavirus surge, a pullback of federal stimulus, weaker consumer sentiment, and troublingly high inflation readings have provoked market unease. And the S&P 500 is off to a rocky start this month. That’s why a host of Wall Street houses have issued warning messages lately, including Morgan Stanley, Citigroup, Bank of America, and Goldman Sachs.

No such clouds exist at JPM, though, which says the current market slowdown is temporary.

“Despite concerns about the recent downshift in economic and business cycle momentum, we remain confident that strong growth lies ahead and activity is bound to re-accelerate,” Lakos-Bujas wrote. Some signs that the pandemic may be easing suggest to him that “strong momentum should continue into 2022 as businesses start to rebuild depleted inventories and ramp-up capex [capital expenditure] from historically depressed levels.” As if to punctuate that, a surprisingly robust retail report came out this morning.

JPM projects that the S&P 500 will hit 4,700 by January (that’s a 4.9% advance from Wednesday’s market close) and finish over 5,000 by the end of 2022.