JP Morgan Chase: 2019 shows “window of opportunity” for stocks

J.P. Morgan predicts in 2019 stocks will likely rouse in the first months so long as the Federal Reserve skips their March meeting and won’t talk about the interest rates. According to the firm non-bank investors around the globe are no longer bullish on stocks and added that the important headwind for stocks is now significantly reduced.

J.P. Morgan analyst, Nikolaos Panigirtzoglou, said to investors “signs of capitulation by institutional investors are creating a window of opportunity for equity markets into Q1 assuming Fed reacts to market stress.”

Just last week the central bank raised rates for the fourth time this year.

Right after the December meeting, stocks rose as the Fed declines their forecast of rate hikes next year to two (from three). But the equity also declines sharply while Fed Chairman Jerome Powell post-meeting conference. Powell isn’t dovish and lean against more hikes, while investors wanted. But Panigirtzoglou believes that whether the Fed got more dovish next year will still be a key factor in knowing whether stocks will boost in the starting months of 2019.

Panigirtzoglou said, “if such dovish shift does not materialize and the yield curve inversion fails to improve, any equity rally in Q1 would most likely be short-lived.”

The firm also said that the “real money investors aren’t bullish on stocks anymore. The S&P 500 quite entered a bear market during Christmas Eve, an occurrence which Wall Street called as a 20% decline or more from recent highs.

Panigirtzoglou also said, “the equity market declines over the past few months have erased real money investors’ previous equity overweights, reducing the need by the investors to actively sell equities from here.”

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