Channelling Ron Burgundy, JP Morgan told investors to “stay bullish” after global equities recorded fresh highs.
It noted that market participants are getting a little jittery – not just because of the nose-bleed territory indexes such as the Nasdaq find themselves in – but for ‘myriad’ other reasons.
Concerns include China’s abrupt slowdown, the Covid delta variant, recent US consumer weakness, high inflation and a fear we are at peak earnings.
Added to that there are a few further niggling worries around liquidity and the possible impact of the US Fed’s tapering of monetary support for the world’s largest economy (predicted to get underway at some point early next year).
JPM noted: “Investor sentiment is much more subdued currently than it was at the start of the year, which we think is good.
“The peak in activity and liquidity indicators is now firmly behind us, and we continue to think that the market should not worry about both the cycle and the Fed at the same time; they should be mutually exclusive.
“In other words, we don’t expect a policy mistake, and hold to our view that the Fed will be vindicated with respect to “inflation is transitory” call.
“Consumer and corporate fundamentals remain robust, and China policy is turning for the better. Delta is a material wild card, but we believe that the third wave might not result in the renewed strict lockdowns. The UK experience is encouraging.”
JPM said in the note it was using any periods of market weakness to “add to risk”, while flagging up the recent upgrades it made to the mining and energy sectors.