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Four Reasons Why JPMorgan Is No Longer Bullish On US Stocks
With just 10 days until the Fed's supposed first rate hike in 9 years according to most pundits (but not Goldman), many are hunkering down such as Bank of America which overnight cut its S&P500 forecast from 2,200 to match Goldman's 2,100 year end price target, and while it hedged that "we're still bullish on S&P 500" it added that "as we approach the end of the year, we turn our focus to the medium and long term, particularly given the increased volatility and uncertainty surrounding slowing global growth and the Fed liftoff" and that "the worst is probably behind us, but the road is still bumpy."
A much more notable call, however, came also overnight from perpetual optimist JPMorgan (yes, we all miss Tom Lee), which overnight issued a report by Mislav Matejka warning that it is not "time to re-enter the US" because "upside is limited at this stage of cycle." Still, just like BofA, JPM felt the need to hedge: "too early to position for recession." Odd, because if one actually looks at either the factory orders data, or the inventory accumulation vs actual sales numbers, the recession may have already started several months ago.
That said, we can understand why one of the pillar of the "bull market" will not make a recession call until it has become consensus. So what does JPM warn? Here is JPM's warning in 4 key bullets:
Time to re-enter the US? No, upside is limited at this stage of cycle, but too early to position for recession
Out of many risks to equities, we don’t see the near-term Chinese outlook as the most worrying one any more – partly as it appears to be a very crowded fear these days. Our key concern is with the US. There are good reasons why US equities are having a hard time performing this year. The list below could almost double up as a “recession watch” set of indicators:
- State of US profit margins is an important consideration. These are elevated and are showing signs of rolling over. S&P500 EPS has not grown for a number of quarters now. Wages need to pick up, but given how poor the productivity is in this cycle, ULCs could go up even with little wage pressure. Margins were typically a credible lead indicator of the cycle.
- A chart we have been highlighting all year remains a problem: HY spreads, ex Energy, have decoupled from equities. The health of the US corporate balance sheets is not as good as the aggregate numbers show - median ND/E ratio has been moving up. This is a concern as credit was a lead indicator of the cycle. M&A volumes are elevated, but not as a share of market cap. Buybacks as a share of EBIT are at past peaks.
- The end of QE has clearly adversely impacted the equity upside, see the bottom chart. However, we do not see the current policy backdrop as a problem. One should typically not sell stocks around the first Fed hike. Yield curve is still not inverted, and real rates are not flashing red, yet.
- The US business cycle is maturing. Many cycle indicators are near or above the past peaks. On the positive side, the strength of the recovery to date was much more muted than normal, and contrasts with the dramatic initial drop, which could act to prolong the current upcycle.
Putting the above together, some of the longer term cycle signals are increasingly worrying, with rising risk that US equities start making sustained losses next year. At best, the upside potential for the US remains limited, in our view.
So should you sell, or better yet, short? Well, JPM is scared to pull the plug here also, and says to wait 1-2 quarters, instead urging investors to "keep buyign the dips."
Having said that, we think that one should not join the risk-off trade in the next 3-6 months. Global equities are oversold near term. We are about to enter the typically constructive time of the year - Q4. We think the nearterm macro momentum is in fact picking up in the DM, as seen in US CESI close to breaking into positive territory, and Eurozone CESI clearly above zero. Fed is nearing, and it could be a positive catalyst, irrespective of the actual decision, a case of "travel and arrive". Keep buying the dips.
Of course, it will be very difficult for equities in Europe, or anywhere else for that matter, to decouple from the US directionally, when the US starts its downtrend. The history was clear on this. What is also clear though, is that regional business, policy and credit cycles have diverged significantly this time around. These considerations should offer at least relative support to Eurozone and to Japan, when the US equities start their downtrend. The best way to shield against a worsening US risk-reward is to remain UW the US equities in the context of the global portfolio, even on the way down.
So, to summarize: "upside is limited" and there is "rising risk that US equities start making sustained losses next year" but "keep buying the dips." Goldman had (and still has) its muppets - we leave it to readers to decide what stuffed animal best represents JPM's clients...
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Meanwhile world markets celebrate today's Chinese intervention. Great news for our artificially functioning markets!
The Fifth Reason Why JPMorgan Is No Longer Bullish On US Stocks: Jamie Dimon and his minions are well positioned to profit from the impending market crash.
Yoiu don't say? Could it be all the world's gold, that which was entrusted to the central banks of the world, has vanished and not being reported missing? The Fed didn't collect and outlaw gold in 1933 because they wanted to divide it up between Bilderburgers so that when the financial system collapses they will still have cold hard money for the next several generations?
http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-vault-larges...
The translation of all the JPM reasons is as follows:
YOU GUYS SELL WHILE WE LOAD UP CHEAP BEFORE QE4 BRINGS THE DOW TO 50.000!!
JPM are such trustworthy folk and Jamie Dimon just has your best interest at heart. All the mega-banks are getting ready for a 'correction', but if it's turns out to be a collapse, they could wind up as lord of the fly's......
Yep, sell means buy.
easy Squidspeak. Every is getting good at it now.
It's the timing that is the bitch, even for the mega boyz.
Four Reasons Why JPMorgan Is No Longer Bullish On US Stocks -1) All their muppets have been fleeced
2) China is out of income
3) The United States is out of margin debt
4) When a trade is crowded go the other way
This is a bit interesting. I read the headline of this article and it seemed to contradict what I had read earlier from another source:
"Morgan Stanley has issued a "full house" buy alert on international stock markets for the first time since early 2009, effectively calling the bottom of this summer's equity slump.
The investment bank reportedly told customers that all five of its market-timing signals are flashing a buy signal in sync with panic selling earlier this week that reached capitulation levels. This occurs very rarely, the bank said, and is a condition that typically leads to a V-shaped recovery which delivers a 23% average gain in stock prices over the following 12 months."
What gives? Maybe international stocks vs domestic?
In any case, in my opinion stocks are a disaster waiting to happen (or happening).
The banks are playing musical chairs. One goes long, one goes short, and when the chair gets takien someone falls on their ass.
I thought they were all just talking their book...
Squidspeak, as referenced lightly above.
Deke in Canadian.
Headfake in Ebonia.
Jab/counter in detroitlandia.
Unrecoverable kick in the nuts in Chichagoland.
Swing and elbow in that basset game the brotha's play
https://www.ted.com/talks/apollo_robbins_the_art_of_misdirection?languag...
Buy the dips. So we can get the fuck out.
"Four Reasons Why JPMorgan Is No Longer Bullish On US Stocks"
1. The trading desk is fully short and plans to make a killing.
World stock markets have lost $12.5 trillion since June 14. Fully half of that is from China and Hong Kong. Not bullish for Apple, Tesla etc.
5) We need an epic dip to spend our expensive dollars on, always the last step in the global dollar-plunder cycle. Blood in the Street!
They left out the fact that stawks have done nothing but gone south since the end of QE.
Recently TPTB reflated WTI prices...now trying to reflate Dr. Copper.
Without Oil inflation (energy) and Copper inflation (building/real-estate driver)...there is no possible business expansion.
Without virtual business expansion the stock markets will crumble on their debts.
My recent watchlist and compare and keep and eye on things:
RUT
SRTY
SPXS
DPK
EDZ
DRV
ERY
FAZ
RUSS
YANG
Such bullshit. Why even bother putting out garbage like that when global markets react to only one thing: central bank stimulus and manipulation.
At this rate hunting season for banksters will never open.
JPM... the original Wall Street war profiteer that got the U.S. into WWI lavishly financing arms and ammo for the British and French in gross violation of the Neutrality Act.
An honorable mention goes to the Ivy-league DEMONCRATIC President who allowed it all to happen.
Reason #5: They plan on pushing up to index 20 DMAs over the next few hours, and would love a booster from retain short fuel, as a Pluto mission passing Jupiter's gravity
So the gist of their position is "stay long". That's all I got out of it.
Could it be that they're not yet finished setting up their shorts?
trying to reflate Dr. Copper is a cheap chip shot.
Chevron on the DOW just went slightly negative today, energy will lead down.
the only pattern i see today is a flat green line across the indexes..someone forgot to turn off the rule 48 switch when they went out for pizza, hookers and blow
QE or no QE ... that is the question. Only a elderly woman wearing size 2 triple wide, yenta pumps knows the answer. People like her have made the country great !