Don’t Wait for Analysts to Turn Bullish to Buy Stocks, JPMorgan Says

(Bloomberg) -- Don’t wait for analysts to upgrade earnings before buying stocks, as history shows that forecasters can lag behind the market by almost a year, according to JPMorgan Chase & Co. strategists.

Take 2016, when the market bottomed out in February, but earnings revisions didn’t turn positive until the end of that year, analysts led by Mislav Matejka said in a note on Monday.

JPMorgan isn’t losing hope that earnings will continue growing in 2019 as economic expansion in the U.S. remains robust. And although U.S. earnings per share are slightly above the historical trend, in the past American profits would peak only after they exceeded it by almost 30 percent.

“We believe the current bounce is far from done and we believe equities could potentially make new highs for the cycle before the next recession starts,” said the JPMorgan strategists. “Equities never wait for earnings before recovering.”

Global equities just capped their biggest monthly gain since October 2015 as a dovish Federal Reserve and bets that the U.S. and China will reach a trade deal spurred optimism among investors following a brutal fourth quarter.

• JPMorgan is overweight emerging markets versus developed markets
• Within developed markets, recommends staying overweight U.S. and neutral Eurozone
• Is also neutral Japan and underweight U.K. stocks

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Phil Serafino

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