Bear market is still alive, no bottom until rate cuts start – JPM

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JPMorgan strategists once again warned against betting on the ongoing rally in stocks.

They say the market is still facing several headwinds, including “rising interest rates and QT, resurging inflation (e.g. persistent move higher in inflation break evens), increased pressure on consumers and corporate earnings, rising defaults, and very high geopolitical risk in Europe, Asia and the Middle East.”

“One strong day (e.g. last Friday) or week in risk markets does not change our negative outlook that is predicated on weakening macro fundamentals,” the strategists wrote in a client note.

While they didn’t rule out that strong rallies can still occur occasionally, strategists highlight that stocks are still in a bear market and are expected to bottom once central banks start cutting rates.

They remain bullish on China and see the pullback as a buying opportunity.

“While China’s “two sessions” released targets in line with lower Street views, the PM’s speech touched on boosting consumption, pursuing SOE reform, and supporting POE’s and foreign enterprises. The momentum factor also looks more attractive as positioning has come off, stock correlations remain low, and momentum remains cheap and is more aligned with value,” the strategists added.