There’s no reason to fear that the rally that catapulted U.S. stocks to successive records this year will end anytime soon, according to JPMorgan Chase & Co. strategists. In fact, more investors may soon join.
“Conditions for a large selloff are not in place right now given already low investor positioning, record buybacks, limited systematic amplifiers, and positive January seasonals,” the strategists led by Dubravko Lakos-Bujas wrote in a note to clients. “Investor positioning is too bearish — the market has taken the hawkish central bank and bearish omicron narratives too far.”
While the S&P 500 climbed to yet another record high last week, the rally has been increasingly driven by a narrow group of mega-cap companies, which is reminiscent of the bubble in tech stocks at the turn of the century.
With the economic rebound following the pandemic-induced slump now past its peak, some fund managers have warned that the next stage in the cycle is a correction, as central banks and governments wind down stimulus measures to tame surging inflation.