JPMorgan Chase & Co's quantitative strategist says that while investors have been concerned about inflation and interest rate hikes, the real signs of trouble are earnings growth prospects.

"Global profit forecasts have been slowing for months," and global earnings data are now in a "net downgrade zone," Khuram Chaudhry, a quantitative easing and derivatives strategist, wrote in a note to clients. "our interpretation of the earnings cycle and its drivers suggests that this slowdown means that inflation may have peaked and bond yields may have run out of momentum."

Global stock markets have fallen sharply this year after major stock indexes in Europe and the US soared to record highs. Investors attribute this mainly to higher bond yields as record inflation has led to soaring input costs and central banks in the developed world have raised interest rates to control prices.

Strategists JPMorgan Chase & Co said that this understanding may now be out of date, and now that the increasingly bleak earnings outlook and economic indicators suggest that an economic slowdown is imminent, this may prevent the Fed from raising interest rates to the extent currently feared by the market. Market prices now fully reflect that the Fed will raise interest rates by 0.5 percentage points in each of the next three meetings.

JPMorgan Chase & Co strategist said that investment opportunities are shifting from cheap so-called value stocks to high-quality stocks, and once bond yields fall, growth stocks are likely to outperform again.

"investors should note that history often shows that when the market moves from an upgrade cycle to a downgrade cycle, the market shows negative returns and the stock market, style and industry rotation usually become very defensive," they said.