Investing.com – Stocks rallied after last week’s U.S. jobs report, even as rates were hiked and further cuts continued, JPMorgan said, leaving stock markets even more divided. .
The Labor Department said Friday that the U.S. unemployment rate rose to 4.0% for the first time since January 2022, while nonfarm payrolls increased by as much as 272,000 jobs last month, suggesting the Federal The Reserve System may continue to delay the start of interest rate cuts.
“We see the prospects for rate easing diminishing this year and now expect the Fed’s first rate cut to occur only in November,” JPMorgan analysts said in a June 10 note.
However, stocks continue to be in demand as investors appear to be shrugging off a host of risks, “including politics (which roiled several emerging markets last week, sending a warning sign for the remaining elections this year), geopolitics, narrow market concentrations, rising stocks memes and cryptocurrency trading, which could signal higher inflation/rates, as well as a number of macro signals indicating increased risks of economic downturn or recession.”
“Despite these multiple risks, shares continue to trade at record highs and investor sentiment and positions are improving,” JPMorgan added.
Taking this into account, the bank is taking a defensive stance on its model portfolio, with an underweight rating on equities and an overweight on commodities and cash.
It also closed its euro zone overweight position on U.S. bonds as expectations for European Central Bank policy easing could be scrapped by persistent inflation pressures and stronger data.
However, when looking at individual stock markets, JPMorgan is favoring domestic-focused markets over more international exposure ahead of the UK general election, with the FTSE 250 tending to outperform when the Bank of England begins to ease policy and against the backdrop of improved internal activity. pulse.
The UK share market trades cheaply, has a low beta, is exposed to China and has the highest dividend yield of any major developed market.
Elsewhere, “we see another move higher for Chinese equities, supported by improving June/July housing market data and stabilizing macro data.”
In Japan, stocks are lagging behind Europe and the US due to a weak yen, but accelerating corporate reforms are a positive in the medium term.
“We believe the pressure from the weak yen will peak in the coming months as the Fed cuts interest rates and the Bank of Japan raises rates. We expect Japanese equities to start to rise more strongly in the second half of 2024, supported by corporate earnings and reforms.”