JPMorgan vs. Morgan Stanley: Who's right on stocks outlook?

JPMorgan vs. Morgan Stanley: Who's right on stocks outlook?
Wall Street strategists disagree on what's ahead.
JUN 03, 2024
By  Bloomberg

Investors betting on further US equity gains over the coming months will be disappointed, according to strategists at JPMorgan Chase & Co. Their peers at Morgan Stanley disagree.

The diverging outlooks signal rising uncertainty about whether the record-rally in stocks can continue after the S&P 500 posted gains in six of the past seven months, despite interest rates prevailing at a decades-high level. Equities have run so hard that strategists have been unable to keep up their forecasts, with benchmarks recovering from every pullback since October.

“We see the market upside capped during summer due to the inconsistency between the consensus call for disinflation, and at the same time, the belief in no landing and in earnings acceleration,” a JPMorgan team of strategists led by Mislav Matejka wrote in a note to clients.

Meanwhile, Morgan Stanley’s Michael Wilson says his bull case is in play, for now. Rising government debt will continue to fuel spending and inflate asset prices in the short-term — including equities — as long as the bond market doesn’t signal any tension.

JPMorgan’s strategists are now Wall Street’s most prominent bear after Morgan Stanley’s Wilson capitulated on his negative outlook. Matejka’s colleague, Marko Kolanovic has acknowledged their pessimistic view has hurt JPMorgan’s model portfolio allocation.

The S&P 500’s late rally on Friday, when the gauge held its 50-day moving average, is a positive signal, according to Wilson. 

“Given the bounce, the benefit of the doubt must go to the bulls in the short term, but we would not be surprised if this mood shifts back and forth in June as the data is likely to remain mixed,” he said.

Still, Wilson’s team advises against chasing short-term gains in so-called low quality stocks with poor fundamentals. He’s skeptical about a full-on rotation from tech stocks into those companies, as well as consumer cyclicals and small caps, arguing that bigger firtms offer more compelling risk-reward prospects over the next few months.

Still, JPMorgan’s Matejka sees a small-cap rebound in the second half, but more so in Europe than the US. 

“Drivers are the expected start of policy cuts in Europe, and a likely better domestic activity momentum,” he said. “We think that for the US these catalysts are not as clear.”

Latest News

'Bogged down' advisors just want to have fun (again)
'Bogged down' advisors just want to have fun (again)

Jim Cahn, of Wealth Enhancement Group, lifts the lid on his firm's partnership model, his views on RIA M&A, and the widely slept-on reason why advisors are merging into larger organizations.

Vestwell unveils new emergency savings account offering
Vestwell unveils new emergency savings account offering

The fintech firm is cementing its status in the workplace savings space with its latest ESA offering, which employers can integrate into their existing benefits package.

'Money Mimosas' and other ways to show your Valentine financial love
'Money Mimosas' and other ways to show your Valentine financial love

Wealth managers offer unique ideas for couples to grow closer emotionally and financially.

Limra research finds financial confidence on the rise among Black American workers
Limra research finds financial confidence on the rise among Black American workers

Survey findings suggest increased sense of financial security and more optimistic 2025 outlook, while highlighting employers' role in ensuring retirement readiness.

DOGE efforts sideswipe muni bonds backed by federal lease payments
DOGE efforts sideswipe muni bonds backed by federal lease payments

Falling prices for some securities within the $4 trillion state and local government debt market spotlight how the push to shrink spending is sending shockwaves across the US.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.