JPMorgan Chase traders "draw the line": US stocks first break 6000, then hit new lows!

Unlike Goldman Sachs' caution, JPMorgan traders are more optimistic about U.S. stocks.

According to reports, JPMorgan traders expect that with the activation of CTA strategies and accelerated stock buybacks, the S&P 500 index will first hit 6,000 points and outline a specific roadmap.

As of the close on May 5, the S&P 500 index was at 5,650 points, leaving less than 10% upside to JPMorgan's expected 6,000 points.

At the same time, JPMorgan also warned that if the S&P 500 index hits 6,000 points, it may represent a recent peak, after which they hold a pessimistic view on the mid-term outlook.

JPMorgan's reasoning is that while trade war rhetoric may not escalate, tariff negotiations are still ongoing, tariffs remain high, and trade agreements are still being negotiated, outlining a specific roadmap for a drop to 5,000 points.

JPMorgan: S&P May First Hit 6,000 Points

JPMorgan traders outlined the possible path for the S&P 500 index to reach 6,000 points:

Current bull market assumptions continue to advance → followed by a short squeeze, with Russell 2000, retailers, and high-beta cyclical stocks performing well → the dollar continues to strengthen → leading to poor performance in emerging markets and developed international markets, with funds flowing back to the U.S. → driving up the technology, media, and telecommunications sectors.

JPMorgan stated that if the above events occur, with the activation of CTA strategies and accelerated stock buybacks, as well as retail investors buying in, the S&P 500 index could exceed 5,800 points, while hedge funds are forced to enter the market, pushing the S&P 500 index to challenge 6,000 points.

Some investors have been waiting for retail investors to capitulate as a signal for the market to bottom, but retail behavior is a continuation of the recent buying trend, with net inflows in April reaching a historical high.

JPMorgan's market intelligence department also believes that the S&P 500 index hitting 6,000 points is more likely, as the market may overshoot, and earnings season may perform better than expected, with tariff-related news likely to continue to develop positively.

Mid-term Bear Market After 6,000 Points

JPMorgan traders warned that if the market hits 6,000 points, it may represent a recent peak, after which they hold a pessimistic view on the mid-term outlook. Traders stated:

I do agree with the current general view on an economic recession, and we will see significant declines in hard data such as non-farm employment and retail sales in the next 1-2 months.

Once we see economic deterioration, the narrative will become important, with the two most likely narratives being:

(i) Tariffs remain high, and trade agreements are still under negotiation;

(ii) Multiple agreements have been signed, and an economic soft landing can be seen as a temporary phenomenon.

They believe the first scenario is the most likely to occur, as although tariff negotiations signal good progress, the likelihood of signing an agreement before the 90-day tariff suspension deadline is low. This could become a significant resistance for the US stock market.

Overall, JPMorgan Chase believes that the market may retest the lows. As the market declines, the earnings per share expectations for the S&P 500 index may be revised downward.

However, if large tech stocks can perform well, the S&P 500 index may remain above the 5000-5150 range.

JPMorgan Chase traders also outlined the fastest path for the S&P 500 index to potentially drop to 5000 points, which would result from a significant deterioration in macro data (non-farm payrolls below 50,000) and unresolved trade relations.

The specific path may be:

Macroeconomic data weakens immediately (services ISM below 50; retail sales month-on-month negative) → important trade relations remain unresolved → industry tariffs on healthcare and semiconductors exceed expectations, such as 50%-100%