JPMorgan Chase’s analysts have once again reiterated their cautious stance on risk assets.
This time, the analysts say that Wall Street expectations for double-digit earnings growth are “divorced from the risks” amid tightening financial conditions and rising geopolitical tensions.
More precisely, consensus expectations of 12% forward earnings per share growth should be reconsidered and revised lower.
“Absent pre-emptive rate cuts by global central banks, we see risks compounding with peak effect of restrictive monetary policy still ahead. We expect the Fed to stay on hold this week with a largely unchanged statement,” the analysts wrote.
The analysts also characterize the third-quarter earnings season as "mixed" so far, adding to the cautious sentiment.
“Continued small cap underperformance, weakening investor sentiment surveys, and decoupling gold prices from bond yields point to increasing investor caution.”
The perspective of JPMorgan's analysts has shifted over time, as they were one of the more optimistic voices during the market selloff in 2022 but have since reduced their equity allocation multiple times due to a deteriorating economic outlook.