Equity Strategy: October Chartbook

Speaker: Mislav Matejka, Head of Global Equity Strategy.

We argued last week that bonds are likely becoming oversold, as Fed and inflation sentiment have moved to extremes. We believe that we are already starting a disinflation phase, as inflation remains a lagging indicator of growth. More concrete signs of peaking inflation, as well as of the peaking inflation expectations, and finally the weakness in activity all suggest bond yields should be capped going forward. Earnings have been very resilient, but are likely to finally show a rollover in Q3. Here, we think that the activity reset is what investors need to see in order to start looking through. Also, recession is our base case, but earnings could hold up much better this time around than during past downturns. Eurozone gas prices likely have two way risk from here, not just the upside risk. JPM assessment remains that there will not be a need for outages. Sentiment metrics are at record lows, and positioning appears very light. Seasonals turn much more favourable in Oct-Dec period. While Value was our key OW entering the year, we called last week for a renewed tactical bounce in Growth style, and Tech in particular, to be aided by potentially peaking bond yields. Regionally, UK remains a OW, given extreme valuation discount, as well as a tailwind for exporters from weak FX. We keep pair trade of OW FTSE100 vs FTSE250.

 

This podcast was recorded on 03 October 2022.

This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4220113-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.