JP Morgan Chase office in New York, US. Picture: REUTERS/ERIC THAYER
“Although the activity outlook remains challenging, we believe that the risk-reward for equities is looking more attractive as we move through the second half,” Kolanovic wrote in a note dated August 1. “The phase of bad data being interpreted as good is gaining traction, while the call of peak Federal Reserve [Fed] hawkishness, peak yields and peak inflation is playing out.”
“Looking at the repricing of cyclical assets in the US and EU, we think the market might have been too complacent too soon in fading recession risks on expectations of a more accommodative monetary policy stance,” Mariotti said. Morgan Stanley and Bank of America, meanwhile, expect sharp downgrades in corporate earnings estimates to add pressure on stocks in the next few months. Morgan Stanley’s Wilson, one of Wall Street’s biggest bears, said on Monday although earnings estimates have started to decline, the bulk of the corporate downgrades will come through only in the fourth quarter.
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