Morgan Stanley "long on short" is optimistic about US stocks in the short term but warns that the "honeymoon period" lasts only a few weeks
JP Morgan has recently shifted to a tactical bullish stance on U.S. stocks, believing that the earnings reports of tech giants and progress on trade agreements will drive a rebound in U.S. stocks. However, the bank warns that this wave of momentum may fade within weeks, and the negative impact of tariffs will become apparent in the coming months. Although there is a moderate possibility of market gains, trade tensions still need to be monitored. The earnings reports of large tech companies will be a key factor for the market
According to Zhitong Finance APP, JP Morgan's trading team has recently shifted to a tactical bullish stance on U.S. stocks, believing that favorable factors such as tech giants' earnings reports and progress in trade agreements will drive the recently troubled U.S. stock market to continue its recovery. Nevertheless, the bank quickly emphasized in a report to clients on Monday that this wave of upward momentum may fade within weeks, and the negative impact of increased tariffs in the U.S. will begin to weigh on the economy in the coming months.
Andrew Tyler, the global market intelligence head, wrote in the report: "Overall, there is still room for the trend of easing trade tensions to continue." However, he added that this does not mean that market alarms have been completely lifted.
On Monday, U.S. stocks fluctuated, with the S&P 500 index dropping as much as 1% during the session, while the tech-heavy Nasdaq 100 index fell by 1.4%. The previous week, U.S. stocks had just recorded the second-largest weekly gain in 2025, buoyed by President Trump's boasting about progress in trade negotiations.
The Tyler team, which previously held a "tactical bearish" stance, pointed out that their latest forecast differs from past bullish views, primarily based on technical factors rather than purely fundamental analysis.
They wrote: "Light positioning, low liquidity, and lackluster investor participation mean that as long as there are no negative news such as tariff escalations or soaring bond yields, the market is likely to continue a moderate rise."
They added that the potential for a trade agreement also makes the risk-reward ratio more favorable.
The Tyler team also expects that strong earnings reports from large tech companies could serve as a catalyst for the stock market. This week, this expectation will be put to the test, as "the seven giants" including Microsoft (MSFT.US), Apple (AAPL.US), Meta (META.US), and Amazon (AMZN.US) are set to announce their earnings.
Despite escalating trade tensions, this group of giants, which includes Google (GOOGL.US), Tesla (TSLA.US), and Nvidia (NVDA.US), is still expected to maintain an average profit growth rate of 15% in 2025, which is basically in line with predictions made in early March.
However, Tyler warned: "The negative impact of the trade war on the real economy will take 1-2 months to manifest." This aligns with the views of major Wall Street forecasters, who generally expect U.S. economic data to deteriorate. The next major test for traders will be the non-farm payroll data to be released on Friday.
In addition, the JP Morgan equity research team, led by Fabio Bassi and Dubravko Lakos-Bujas, believes that the S&P 500 index will fluctuate in the range of 5200 to 5800 points, influenced by both trade positives and recession concerns.
The team stated, "We prefer to reduce risk assets during strong periods rather than chase gains, as the market narrative needs more clear signals to fully turn around."
