Source: Jin10 Data

JPMorgan's asset management division said that the historically strong start of the US stock market this year should continue until the second half of 2024.

David Kelly, chief global strategist-led strategists at the company wrote in mid-year outlook report that although the S&P 500 index has achieved double-digit returns since January, the trend seems more like a "bitter journey" than a "rocket ride", but steady profits, the end of the Fed's monetary tightening policy and economic strength will continue to boost the US stock market over the next few months.

Kelly and his team wrote: "Expectations for returns should be more modest, but healthy profit growth and broad valuation dispersion suggest that the overall environment remains favorable for stock performance and has the potential to generate alpha." They recommend buying large-cap stocks, as well as mixing value and growth stocks.

The S&P 500 index oscillated between small gains and losses on Thursday, after Fed officials forecasted only one rate cut in 2024, lower than traders' expectations for this year. Nonetheless, the benchmark index of the US stock market is still close to its historic high, mainly due to people's optimism that the Fed's next move will be a rate cut, and the sustained enthusiasm for artificial intelligence technology has boosted large tech giants like Nvidia and Microsoft.

Kelly and his team pointed out that unlike last year, the market has improved in breadth as well as strength as the wider earnings recovery has helped lift stocks beyond tech giants. According to data compiled by foreign media, only five of the 11 sectors in the S&P 500 index rose during the same period last year.

Strategists wrote that artificial intelligence is a risk to the outlook because only a few companies are fueling the market's enthusiasm, and the timetable for adopting artificial intelligence is still uncertain. Another reason is the slowing economic growth, which could impact profit margins if businesses face pricing pressures.

However, they believe that these concerns are not severe, unlike JPMorgan's chief market strategist Marko Kolanovic, who continues to sound the alarm about a potential stock market crash. Although Wall Street companies sometimes hold different opinions under the same roof, JPMorgan's asset management division and its trading division led by Andrew Tyler have apparently broken with Kolanovic, who represents the bank's internal views.

JPMorgan's asset management strategists wrote: "The end of monetary tightening policy plus robust nominal GDP growth provides a constructive backdrop for the US stock market for the remainder of this year."

Editor/Lambor