“Our optimism has been tempered by the still elevated recession risks, and the risk that the October CPI data turns out to be anomalous and/or fails to dampen central bankers’ eagerness to push monetary policy into tighter territory” , explains in a note to clients.
Although JP Morgan’s chief equity strategist remains bullish on stocks, especially in the long term, he sees risk rally “as an opportunity to moderately lower our overweight rating on the stocks given the risks mentioned.”
“We also maintain our overweight rating on commodities given the potential boost from the easing of Covid restrictions in China, and as a hedge for geopolitical risks and inflation,” the analyst concluded.
The Fed’s clues
Fed Governor Christopher Waller, a voting member of the committee that sets interest rates this year, said markets should now pay attention to the “end point” of rate hikes, not the pace of each move, and that the endpoint is probably “far away”.
The comments follow a weaker-than-expected inflation report last week, which had boosted hopes that the Fed could scale back its steep interest rate hikes and helped fuel a strong market rally.
Meanwhile, Fed Vice Chair Lael Brainard said the Fed is likely to cut its interest rate hikes soon, as the central bank tries to determine how high borrowing costs need to be and how long they need to stay there to reduce inflation.
Source: Ambito
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