The outlook for stocks looks dour as the chances of Federal Reserve rate cuts decrease and risks abound, according to JPMorgan’s Marko Kolanovic. “Equity markets disconnected even further from bonds on Friday, as equities rallied post-NFP even as rates reset higher and cuts got pushed further out. We see diminished prospects for easing this year, and now expect the first Fed cut only in November,” wrote Kolanovic, one of the most followed strategists on Wall Street. His comments come after the Labor Department reported Friday that the U.S. economy added 272,000 jobs in May. That easily exceeded a Dow Jones estimate of 190,000. The S & P 500 initially ripped higher on Friday after the data was released but closed along the flatline for the day. The benchmark 10-year Treasury note yield also jumped more than 10 basis points to trade back above 4.4% that day. Kolanovic also said stocks aren’t pricing in a “plethora of risks,” including elections, geopolitical tensions and narrow market breadth. “Despite these abundant risks, equities continue to trade around record highs, and investor sentiment and positioning are elevated,” he said. .SPX YTD mountain S & P 500, YTD Against this backdrop, the strategist reiterated his “defensive tilt,” staying overweight on commodities and cash and being underweight on stocks. Investors will get further clues on when the Fed may cut interest rates later this week. The central bank is slated to end a two-day policy meeting Wednesday. While no policy changes are expected, the CME Group’s FedWatch tool shows traders are pricing in a roughly 50-50 chance of a rate decrease in September and a 68.5% possibility of another in November. JPMorgan is the most bearish firm out of all those surveyed by CNBC PRO with an S & P 500 target of 4,200. The S & P 500 closed Monday at 5,360.79.
JPMorgan’s equity strategist says stocks are ignoring ‘abundant’ risks, sees maybe one Fed cut
Jun 11, 2024
