Marko Kolanovic, chief markets strategist at JPMorgan Chase & Co. (NYSE:JPM), has suggested that a potential decline in inflation in the final months of 2023 could pose a significant challenge to the stock market, as it may weaken the pricing power businesses have recently enjoyed. Industries such as retail, automotive, and airlines, which have successfully increased their prices over the past two years, are expected to be most impacted by this cooling inflation.
Kolanovic also expressed concerns about the delayed effects of interest rate hikes on the economy. The U.S. stock market has been unstable since August as investors assess the impact of persistently high-interest rates. Despite this, U.S. equities broke a four-day losing streak on Monday, with the S&P 500 Index rising by 0.4%, following its worst weekly drop since March.
In contrast to his cautious stance on equities overall, Kolanovic has upgraded JPMorgan's position on global energy stocks to Overweight due to anticipated short and long-term increases in oil prices. Last week, JPMorgan predicted that oil prices could reach up to $150 per barrel and advised investors to invest in the energy sector as it rebounds from a pause. The bank highlighted 13 "key global equities to own" during this upswing, including Exxon Mobil Corp (NYSE:XOM)., Marathon Oil Corp (NYSE:MRO)., Baker Hughes Co., Cenovus Energy (NYSE:CVE) Inc., TotalEnergies (EPA:TTEF) SE, Saudi Aramco (TADAWUL:2222), PetroChina, and Beach Energy (OTC:BCHEY) Ltd.
Although energy stocks have struggled to keep pace with the rise in oil prices, Kolanovic forecasted that this trend could alter as increasing oil prices attract more investors.
Despite his general caution towards equities, Kolanovic projected that Japanese stocks may excel due to heightened interest from foreign investors responding to stricter policy regimes globally.
Furthermore, Kolanovic proposed that China is entering a "buying zone." Trading opportunities in Chinese stocks could arise as October data, including travel and retail sales from the Golden Week and property transaction numbers, become available. JPMorgan's positive outlook on Chinese equities also takes into account potential announcements regarding local government financing vehicles and new stimulus measures expected from the Communist Party's Politburo Standing Committee meeting at the end of October.
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