JPM Comments Regarding Recent Developments:
JPM’s cross-asset team says it might be too early to get bullish reiterating their call for a “rangebound” market between 5200 and 6000:
“Two weeks ago we turned tactically cautious on risk assets on increasing concerns from trade uncertainty into business sentiment, itself enough to lower sharply our expectation for US growth," with “clarity on trade tensions [not] imminent”.
“Despite the exemptions and delays in the tariffs announced so far, we estimate that the average tariff rate has already increased by 5% in the US (from 2% to around 7%), with a bias for a further increase to around 11% if broad reciprocal tariffs and 25% sectoral tariffs are effective,” they said, which will maintain US growth concerns and fuel the rotation "to the more structurally positive themes of China AI and Europe’s fiscal shift.”
As “less confrontational trade policies,” are “not our baseline scenario at this point," and with the “Trump put,” likely remaining far out of the money as evidenced by the "acceptance of an ‘adjustment phase’ for the US economy…, especially if that cost is perceived as temporary.” They estimate that level at around 5200.
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