JP Morgan sees upside for stocks, only negative news around Omicron not likely
By Alexander Bueso
Date: Monday 06 Dec 2021
(Sharecast News) - Equity strategists at J.P. Morgan believed there was further upside to be had in stocks during the following year, even in an "adverse" scenario in which the new strain of Covid-19 turned out to cause relatively high mortality and vaccines did not work well.
Indeed, they believed that not only negative news-flow was likely, for example, markets might learn that the new strain was milder.
In any case, even under the adverse scenario, that would only delay the market upside, not cancel it, strategist Mislav Matejka said in a research note sent to clients.
"Investors are likely to position to price re-designed vaccines from early next year, so the window for caution on the back of the Omicron scare might not be all that long," he explained.
He also believed that activity in China was bottoming out and a more favourable policy backdrop coming up.
Neither did he expect central banks would turn incrementally more hawkish relative to what futures markets were already pricing in.
The latter meant that the recent flattening in the 2-10 year interest rate curve "might be getting overdone".
"DXY is not entering '22 record short and the equities RV vs fixed income is still very clear," he added.
"EM/China could be an opportunity next year. Within Tech, we have kept this year an OW in Semis, but have last week taken profits, given very strong outperformance."
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