Record S&P 500 'Feels Inevitable': JPMorgan

While U.S. stocks may pull back in coming weeks amid concern over Federal Reserve policy, the S&P 500 will reassert itself around September before climbing to an all-time high, according to JPMorgan Chase & Co.’s trading desk.

“Better econ growth with better earnings and visibility to the end of a hiking cycle should be supportive of stocks,” the team including Andrew Tyler wrote in a note Monday. “Taking out the ATH high feels inevitable, just a matter of timing.”

Stocks started August on a weak note after a 10-month, 28% advance pushed the S&P 500 within shouting distance of that milestone. The index ended July at about 200 points below its record of 4,796.56 reached in January 2022.

To Tyler and his colleagues, the question is whether a fresh high materializes at 4,800, 5,000, or even higher. Though many defensively positioned investors have been forced to pare back bearish wagers and chase gains, the team still see room for equity exposure to expand.

“Markets have moved rapidly higher and while we are seeing some capitulation, many bearish investors have moved to neutral and not outright bullish given economic uncertainty and the potential for Fed policy to crack/break something,” they said. “It does appear that there is money on the sidelines waiting for an opportunity to come into US stocks.”

The sanguine view is at odds with the firm’s own strategist Marko Kolanovic, who has stuck to his bearish stance almost all year in the face of the equity rally.

In a note Monday, Kolanovic said stocks are pricing in an unrealistic outcome of continued economic expansion and imminent rate cuts by global central banks.