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JPMorgan analysts told investors in a note Monday that the firm is waiting for policy risk to ease.
They clarified that JPMorgan still believes Asian growth will be supportive of the global cycle and low investor positioning provides a floor to the market.
However, reiterating comments made in a memo last week, they stated they are “growing increasingly worried about central banks making a policy error given the recent escalation in hawkish rhetoric.” At the same time, they also pointed to “new geopolitical tail risks following the destruction of the Nordstream pipelines last week.”
“While we remain above consensus positive, these developments are likely to introduce delays in the economic and market recovery, putting our 2022 price targets at risk and suggesting they may not be met until 2023, or when these risks ease,” added the analyts.
JPMorgan sees see limited further impact in the U.S. from the UK, “though the drop in demand from Fed, U.S. banks, and foreign investors cannot be ignored.”
Meanwhile, focusing on equities, they stated that they are “proving to be an effective real asset class as their earnings are linked to inflation.”
“Unless nominal GDP growth downshifts drastically, earnings growth should remain resilient and defy expectations of a decline even in an environment of low real GDP growth,” they added.
