Investing Bank Jpmorgan Sees Warning Signs Mounting in 2023's Q1

A JPMorgan Chase & Co. warning warned the market may not be able to sustain its momentum in early 2023.

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In the past six months, the S&P 500 has gained over 6%, recovering some of the ground that had been lost from the start of the year. Since an Oct. 12 low, the broader market index has rallied 14%.

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Mislav Matejka, a JPMorgan strategist, warned that further gains are unlikely given the mounting warning signs.

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There is a growing interest in stocks as a result of the recent stock rebound. In contrast to last summer's conviction that any rally is simply a bear-market rally, many people today are more optimistic this time around that recession can be avoided or at least delayed," he said.

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It is unlikely that a fundamental confirmation will take place for the next leg higher, and we believe the rally will fade throughout this quarter, with Q1 marking the year's high.It is unlikely that a fundamental confirmation will take place for the next leg higher, and we believe the rally will fade throughout this quarter, with Q1 marking the year's high.

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Matejka notes that a heavily inverted yield curve, tight money supply in the U.S. and Europe, and tighter lending standards will limit stock price gains going forward. Historically, equity prices do not bottom until the Fed has begun cutting, and we have never seen a bottom without the Fed stopping hiking.

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During its January 31-February 1 meeting, it reduced rates by 25 basis points, whereas they had increased by 50 basis points in December. Nevertheless, the central bank told reporters that rate increases will continue in the near future. In percentage terms, a basis point equals 0.01 percent.

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Matejka said it might be premature to assume that recession is off the table now, as the Fed will have tightened 500 basis points or more in a year, and monetary policy's impact usually takes some time to reach real estate, if not longer.

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Savita Subramanian, a strategist at Bank of America, noted that stocks are not a good time to buy right now.

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Subramanian increased the weight of materials from underweight to overweight, and the weight of communication services from underweight to overweight.

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The number of resources and eyeballs allocated to active fundamental investing has decreased as a result of the declining number of active investors.". As a result, we recommend a selective approach when it comes to equities, he said.

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