Bulls Hang On as JPMorgan Says Market Angst Is Overblown

Stock investors are once again showing that they can look through any jolt of bad news.

A day after one of the most bruising selloffs of the past year, strategists from JPMorgan Chase & Co. to UBS Global Wealth Management urged clients to buy cyclicals and hold onto their conviction that the economic recovery is just getting started.

The “reopening of the economy is not an event but rather a process, which in our opinion is still not priced-in, and especially not now given recent market moves,” wrote JPMorgan strategists led by Dubravko Lakos-Bujas. “We believe this does not signal the beginning of a down cycle.”

U.S. equity futures were up modestly on Tuesday, suggesting that stocks may claw back some of yesterday’s losses. In Europe, investors started to tilt back to the reflation trade, with commodity shares and banks outperforming tech. S&P 500 futures gained 0.4% as of 6:54 a.m. in New York, while Nasdaq 100 Index contracts added 0.5%.

Bulls Hang On as JPMorgan Says Market Angst Is Overblown

JPMorgan’s strategists laid out a case for why they’re growing even more bullish on equities. The healthy U.S. economy and pent-up consumer demand means there’s potential for stocks to keep climbing, they wrote. The bank raised year-end targets for the S&P 500 by 4.5% to 4,600 and upped the earnings projection by $5 to $205 a share.

“We remain constructive on equities and see the latest round of growth and slowdown fears premature and overblown,” said the strategists, adding that retail, banks and energy shares are all strong buys.

In the view of UBS Global Wealth Management, the spread of the delta variant is a delay, but won’t stop life from returning back to normal. Vaccines have been effective against new variants and governments will look past the rising case numbers, wrote strategists led by Chief Investment Officer Mark Haefele.

They also pointed to a strong earnings season that could deliver a boost of confidence, citing data showing that 90% of companies that have reported so far have topped earnings estimates.

“Equity markets can resume their rally and will be led by cyclical parts of the market, including energy and financials,” the strategists wrote.

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