JPMorgan Strategist Sees Bear Market Over, Notes Stock Picks

J.P. Morgan Wealth Management considers the bear market to be over and sees opportunities now in mid-cap and select large-cap stocks, says Elyse Ausenbaugh, global investment strategist with the firm.

While the S&P 500 currently stands near the firm’s year-end target, JPMorgan expects the index to reach about 4,500 in 12 months, and to produce solid returns over the next 10 to 15 years, Ausenbaugh noted in an interview on CNBC’s “Squawk Box” on Thursday.

Notably, the JPMorgan strategist sees potential for active managers to select winning stocks.

Investors may be scared by the S&P 500′s elevated valuation, but stripping out the seven biggest names, valuations are actually below average, she said.

“So we are seeing some stock-picking opportunities in U.S. large caps, [and we're] also taking a long, hard look at the mid-cap equity space in the United States, where we see the potential for investors to position for a reset of the cycle when that comes.”

The firm is close to year-ahead targets for the broad S&P 500, “so we’re navigating it with a little bit more selectivity and emphasizing to investors that they should be focused on alpha, not beta, but there is upside,” Ausenbaugh said.

“And I think it’s really important to remember what it is we hire equities to do in a portfolio in the first place, and that’s to be the engines of long-term, multi-year capital appreciation,” she said. “We still think that over the course of the next 10 to 15 years the S&P 500 is going to be able to annualize total returns north of 7%.”

It’s not unreasonable to expect the S&P 500 will get back to hitting all-time highs in the next one or two years, although not necessarily in the next 12 months, she added.

“There are opportunities for these active managers to pick and choose the right winners,” Ausenbaugh said. “We don’t expect the index to revisit those October lows.”

Mega-cap tech stocks look overvalued now, and J.P. Morgan Wealth Management has been looking for other ways to play the big-tech themes, especially artificial intelligence, she said.

“We’re looking for those opportunities more in mid-caps, where you are seeing attractive valuations, and where we think this next leg of the rally could potentially broaden out to.”

The economy has been more resilient than a lot of people feared “and we welcome that as a good thing,” she said, adding that in response to a rolling contraction in earnings, corporate executives have already taken measures to shore up margins so their companies can handle economic difficulties.

JPMorgan sign in New York City. Credit: Shutterstock