Morgan Stanley warns: The threat of stagflation is coming, and the rebound momentum of the US stock market may come to an abrupt halt
JP Morgan strategists warn that the U.S. may face dual pressures of rising prices and slowing economic growth, which could threaten the rebound momentum of the S&P 500. The team believes that the market is about to enter a period of weakness, with signs of stagflation potentially emerging. Although the S&P 500 has performed well in 2023, global trade tensions and the increasing U.S. budget deficit may put pressure on the stock market. JP Morgan is more optimistic about international stocks and emerging markets, particularly the Chinese technology sector
According to the Zhitong Finance APP, JP Morgan strategists have stated that the U.S. may face dual pressures of rising prices and slowing economic growth this summer, which could threaten the rebound momentum of the S&P 500 index.
Led by Mislav Matejka, the team wrote in a research report: "After the recent rebound, we believe the market is about to enter a period of weakness, which may exhibit certain stagflation characteristics."
The team analyzed that the threat of stagflation, combined with uncertainties in negotiations between the U.S. and major trading partners, will put pressure on the stock market in the coming months, noting that "the current tariff situation is more severe than most people expected at the beginning of the year."
This bearish forecast comes as the S&P 500 index has just recorded its best monthly performance of 2023. However, concerns such as escalating global trade tensions and a surge in the U.S. budget deficit have resurfaced. Year-to-date, this U.S. benchmark stock index has only slightly risen by 0.5%, underperforming the Eurasian stock markets.
JP Morgan strategists remain more optimistic about reasonably valued international stock markets rather than overvalued U.S. stocks, while maintaining a positive outlook on emerging markets, particularly favoring the Chinese technology sector.
Meanwhile, Goldman Sachs strategists led by David Kostin stated that the current trading price of the S&P 500 index is close to fair value, and they expect valuations to remain roughly flat over the next 12 months. Morgan Stanley strategist Michael Wilson reiterated his optimistic outlook on U.S. corporate earnings, believing that stock valuations may have bottomed out and are on the rise
