One of Wall Street’s biggest bulls last year says he’s learned his lesson and isn’t chasing stocks right now
The young new year has been all about reversion to the mean. Take the ARK Innovation ETF
— Cathie Wood’s flagship fund of mostly unprofitable tech companies has stormed 19% higher in 2023, after last year’s 67% nose dive. The broader S&P 500 has gained 4% this year.
JPMorgan strategists led by Marko Kolanovic aren’t buying it. “We believe that the current equity market rally will start fading as we move through [the first quarter]. The positive catalysts (peak in bond yields, in inflation and in USD, China reopening, and more benign European gas prices), which helped drive a rebound are now in the open,” the team says in a new note.
What could mess things up? “Potential curveballs could come from the Fed, politics, disinflation phase not progressing smoothly, weaker earnings, weaker capex and renewed rollover in activity momentum,” they say. On the Fed in particular, the strength of the labor market suggests the central bank may keep tightening rates even after March.
Kolanovic was a bull on the stock market for much of 2022, with an overweight equities call for nine months. But JPMorgan maintains its model portfolio actually outperformed the benchmark by 3.4 percentage points, owing to calls to underweight government bonds and overweight commodities. Its long dollar position and underweight on credit also helped.
“Looking back, we believe the lessons from 2022 are 1) to take more risk on cross asset rather than within asset class themes in a fast-evolving macro environment, and 2) to be more tactical and to not hesitate to even reverse recommendations if macro trends justify such change,” says the team.
U.S. stock futures
were range bound. The dollar
soared against the Japanese yen, and the Nikkei 225
rallied, after the Bank of Japan opted not to make any changes to its monetary policy, even given the difficulties it’s been facing with its yield-curve control program.
The yield on the 10-year Treasury
fell to 3.48%.
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The U.S. economics calendar includes retail sales and producer price data, both at 8:30 a.m.. Eastern, followed by industrial production. Shortly after the open, the NAHB housing market index and business inventories data will be released, and at 2 p.m., the Fed’s Beige Book will be released.
U.S. Treasury Secretary Janet Yellen met with China Vice Premier Liu He in Zurich. “During the candid, substantive, and constructive conversation, they exchanged views on macroeconomic and financial developments,” the U.S. Treasury said. The two said they planned to meet next in their home countries.
after the close is the highlight of the day’s scheduled earnings releases. PNC Financial
declined after missing earnings estimates.
shares climbed after a positive trial for an RSV virus vaccine.
says it is closing its Japanese operations. FTX for the first time disclosed there was a shortfall of funds at its U.S. exchange.
may cut about 5% of its workforce, according to a report.
Ukraine’s interior minister died in a helicopter crash.
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| TSLA, ||Tesla|
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| APE, ||AMC Entertainment preferreds|
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| AAPL, ||Apple|
| NIO, ||Nio|
| AMZN, ||Amazon.com|
| BABA, ||Alibaba|
It’s very early days for fourth-quarter earnings, but FactSet’s John Butters looked at what executives have been discussing on conference calls so far. Right now, the biggest drawback to earnings have been been currency moves and labor costs. The impact from COVID, interest rates, transport costs and oil prices also have been among the negative factors.
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