Stocks will likely erase recent gains and retest 2022 lows: JPMorgan

US stocks finished the first quarter almost 7% up despite the biggest bank failures since the 2008 crisis and the Federal Reserve pushing ahead with its most aggressive interest-rate increases in decades.The stock market is unlikely to sustain its recent gains and may slide back toward 2022 lows in the months ahead, strategists at the US bank led by Marko Kolanovic wrote in a note published on Monday. The S&P 500 index of US large-cap shares advanced 6.

"The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally," they wrote."For a rational investor, we think this makes little sense. We expect a reversal in risk sentiment and the market re-testing last year's low over the coming months." While concerns over banking-sector instability seemed to have eased in recent days, that could be a temporary relief and the risk of further turbulence remains high, according to the strategists.

"The banking crisis appears to have quieted down, though we would characterize this as the calm before the storm," he added. "There is ground to cover on fighting inflation and pushing back against the market's assumption of cuts, so the original source of stress, rates higher for longer, can re-enter the picture," he added.

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