The U.S. stock market experienced a significant sell-off this week, with related technology stocks dropping to a two-year low. Market risk aversion is gradually increasing, with many investors concerned that the series of fiscal and trade policies implemented by U.S. President Donald Trump will have a massive impact on the global economy.
David Lebovitz, a global strategist analyst at JPMorgan, has also raised the probability of a U.S. economic recession from 15% to 20%. Although market risk premiums are rising, Lebovitz remains optimistic about the current situation, believing that the economic fundamentals are still stable. While this wave of decline may continue, he remains positive.
He suggests buying technology and financial stocks if the S&P 500 falls below 5,500 points.
According to Bloomberg, despite increased market volatility, Lebovitz believes the current decline primarily affects overvalued and speculative assets, while the overall credit market has not shown signs of collapse, and economic data still supports economic expansion. He recommends that if the S&P 500 index falls below 5,500 points, investors should consider buying U.S. technology and financial stocks, as the long-term prospects for these industries remain optimistic. JPMorgan forecasts that the S&P 500 index is expected to reach 6,400 points by the end of this year, leaving a 14% upside potential from current levels.
Economic data remains resilient, with a stable labor market and corporate earnings reports.
Lebovitz further stated that despite the gloomy market sentiment, U.S. economic data has not deteriorated. For instance, the employment report for February was stable, and corporate earnings reports for the fourth quarter of 2023 performed well. He believes the economy is still in a state of “steady operation” and has not experienced a “cliff-like decline.”
However, uncertainty regarding Trump’s administration’s trade and immigration policies continues to lead to increased investor risk aversion, further exacerbating market volatility.
Technology stocks plummeted, U.S. Treasury yields fell, and Bitcoin dropped below $80,000.
The U.S. stock market began the week poorly, with the Nasdaq index recording its largest single-day decline of 4% since 2022 on Monday (March 11), while the S&P 500 index also fell sharply by 2.7%. U.S. Treasury yields declined, Bitcoin fell below $80K, and about ten institutional players postponed the issuance of corporate bonds due to market weakness.
Market uncertainty has led Wall Street to rethink investment strategies. Earlier this year, the market generally expected Trump’s administration’s tax cuts and deregulation policies to be beneficial for stocks. However, as uncertainty surrounding trade and immigration policies has increased, investor sentiment has become more cautious.
JPMorgan recommends diversifying investments and shifting towards high-yield bonds and overseas markets.
In light of market uncertainty, Lebovitz indicated that asset allocation adjustments have begun, suggesting that investors moderately reduce their equity positions and shift towards high-yield bonds. Additionally, JPMorgan has expanded its investment scope to markets in China and Japan, while ending its low allocation to European markets.
Nonetheless, there are still many bullish voices in the market. For instance, UBS Global Wealth Management has expressed that although UBS has increased hedging operations, it has not sold off stocks and remains optimistic about the growth potential of AI and technology industries.
While the market may experience short-term fluctuations, JPMorgan believes that the U.S. economy will not undergo a cliff-like decline.
Lebovitz emphasized, “We do see a slowdown in economic growth, but there are currently no signs of collapse.”
In summary, investors should pay attention to whether the S&P 500 index falls below 5,500 points and seize the opportunities presented by market declines. JPMorgan recommends focusing on U.S. technology and financial stocks while moderately diversifying investments into overseas markets to reduce market risk and capitalize on potential rebound opportunities.
(CPI leads the market upward, Bitcoin at 83K, ETH still declining)
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