Financial network news on October 10th (Editor Bian Chun): The strong rise of US stocks is forcing one of Wall Street's largest bears to adopt a more positive stance.

Since October 2022, JPMorgan's strategists have been bearish on US stocks. However, according to the report released by the chief global equity strategist of the bank, Dubravko Lakos-Bujas, this situation seems to be changing.

Although Lakos-Bujas did not update JPMorgan's year-end target price of 4200 points for the S&P 500 index (which implies a significant drop of 27% from the current level), he does advise investors not to be too bearish on the market.

"We are adjusting our views to be long defensive stocks and short cyclical stocks," said Lakos-Bujas.

Factors driving Lakos-Bujas's change in sentiment include the Fed rate cuts and China launching new stimulus measures.

"Policy support from the world's largest economies (China and the USA), along with unexpectedly resilient US economic growth, tight labor market, sustained government deficit spending, and record highs in stocks, crediting, and housing markets," said Lakos-Bujas.

The bank also pointed out that the health of American consumers is good, with their total wealth increasing by a total of $50 trillion since the outbreak of the new crown epidemic.

According to the Federal Reserve data, American consumers hold approximately $185 trillion in assets, mainly composed of stocks, bonds, real estate, and cash, with only $21 trillion in debt. This reflects a healthy balance sheet.

The outlook for corporate profit growth also excites Lacoste-Bujas, who expects corporate profit growth to accelerate from 3% in the past two years to 12% in the next two years.

"American companies are increasingly focused on using pre-tax income for investment spending rather than returning post-tax profits to shareholders through buybacks, which also helps stimulate the economy," explained Lacoste-Bujas.

This is partly being driven by the booming AI industry, with expectations for large tech companies to accelerate their research and capital expenditure investment, exceeding $500 billion annually.

Lacoste-Bujas pointed out, "These driving factors are helping offset the macroeconomic imbalances."

"While it is too early to assert that this is a turning point, it does indicate that a recession is unlikely in the short term, especially with unexpectedly strong employment growth and a decrease in the unemployment rate breaking the trend of a slowing job market," he stated.

But Lacoste-Bujas is not entirely bullish on the US stocks. The strategist warned that the presidential election in November could bring market volatility depending on the election results, and a drop in interest rates could adversely affect corporate profits, especially in the financial sector.

On Wednesday, the three major US indexes collectively closed higher, with the S&P 500 index and the Dow hitting record highs. Earlier, the Federal Reserve released the latest meeting minutes. The market is awaiting the US September inflation data and the start of the earnings season.

As of the close on Wednesday, the S&P 500 index rose by 0.71% to 5792.04 points. Statistics show that this is the 44th time this year that the index has reached a historical high.

As the Fed initiates a rate cut cycle, the possibility of a soft landing for the US economy increases, leading to a growing optimism on Wall Street for US stocks. Previously, Goldman Sachs' strategists raised the year-end target price of the S&P 500 index for the third time this year, now forecasting the S&P 500 index to close at 6000 points by the end of the year, the second highest target price given by Wall Street strategists.

Editor/ping