JPMorgan Private Bank also does not see a recession, despite the prospect of higher for longer interest rates, instead backing a “softish landing” — which involves a slowdown, but not a sudden halt in economic activity.
Faller noted that there are some “pain points,” with 30-year fixed mortgage rates hitting a 22-year high in the U.S. in August, and with credit card delinquencies ticking up from their very low base, along with the end of the student debt moratorium.
“Even with those challenges in mind, consumers haven’t changed their behavior all that much. The most recent U.S. retail sales gauge showed spending is still pretty solid, and earnings from big retailers signposted the same,” she added.
“Rather, more of the changes seem to be happening at the margin, as consumers are shifting away from brand names and toward some thriftier options, and reorienting back toward goods (e-commerce is actually accelerating) after a red-hot year for services that were disrupted by COVID.”
Opportunities in ‘strong balance sheet tech’
The prevailing theme of the latest earnings season was upside surprises, with S&P 500 earnings contracting by circa 4% ,versus the 7.3% slide expected heading into the quarter, according to JPMorgan Private Bank. Faller also highlighted that 12-month earnings expectations for the S&P 500 have risen steadily since March.
“The biggest worries from the last year also seem to be fading. Mentions of things such as ‘inflation’ and ‘economic slowdown’ have fallen meaningfully, and most management teams seem pleasantly surprised by the durability of demand,” she added.
“With less worry about the near term, more firms are starting to focus on how they can continue growing in the long term. Mentions of ‘AI’ have skyrocketed, with companies across industries ramping up investments.”
Technology stocks, particularly those with a heavy focus on AI, have driven a huge portion of the market’s gains so far this year. Nvidia shares closed Tuesday’s trade up 232% since the start of the year, while Facebook parent Meta is up 149% and Tesla has climbed 108%.
This content was originally published here.
