JP Morgan isn’t changing their bullish outlook despite the continued surge in equities. They see the recovery broadening and further room for upside for equities:
“The important economic news of the last few weeks is the broadening of the recovery across sectors (Europe and Japan), regions (towards services), and types of spending (jobs). This increases confidence in the longevity of the recovery, but is now also making us recognise that data are running ahead of some of our forecasts.”
They believe three factors have kept investors at bay in recent months and that skepticism has helped contribute to the rally in stocks:
“Three areas of uncertainty have kept investors from fully committing to risky assets –– the end of QE, Chinese tightening, and the Greek debt crisis.”
Their analysts say the end of QE is having almost no impact on markets, China’s concerns are slowly but surely being dealt with and the Greek crisis is unlikely to result in widespread economic damage.
Looking ahead, they see the Q1 earnings season as being another very positive catalyst for stocks and recommend investors remain invested in momentum names:
“The major driver for equities in April should be the Q1 reporting season that kicks off next week. An improved positive-to-negative pre-announcements ratio (of 0.79 in Q1 2010 vs 0.67 in Q4 2009) points to another positive profit surprise. There remains positive momentum in top-down earnings forecasts….We stay long equities focusing on cyclical sectors and small caps on momentum.”
Source: Hedge Analyst, JPM
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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