Equity Strategy: June Chartbook - Sticky inflation and moderating growth are not a great combination; Keep up Defensive rotation, seen so far in Q2, together with Commodities
Description
Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
Last couple of months are showing softening US growth momentum, but at the same time an increasing potential for higher for longer Fed. We see the market upside capped during summer due to the inconsistency between consensus call for disinflation on one hand, and the belief in no landing and in earnings acceleration on the other. Within the market there was a more Defensive rotation underway in Q2, compared to Q1. We think this will continue on likely peaking in bond yields and more attractive valuations. At sector level, we hold a barbell of Defensives and Commodities, and are in particular cautious on Consumer Cyclicals such as Autos and Travel & Leisure. Stylewise, our OW on Growth vs Value continued working – we are not changing it for now, but Small caps could trade better in 2H. They have again lagged ytd, in all key regions, are cheap, and typically perform better when policy cuts start in Europe. In addition, European activity already had a reset last year, and is likely to be better this year. For the US, the rotation might work also, but we do not see it as clear cut, as Fed could stay higher for longer, and US domestic growth could actually weaken meaningfully in 2H. We reverse our long-term preference for FTSE100 vs FTSE250.
This podcast was recorded on 02 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4715457-0.pdf for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.
United States
