JPM: Mix of Blue Chips, Value & Growth Stocks for Your Portfolio
In their mid-year outlook report, the strategists led by David Kelly at $JPMorgan Chase(JPM)$ Asset Management wrote that the US stock market has started off strong this year, and the momentum is expected to last through the latter half of 2024.
Blue Chips, Value & Growth Stocks
While the move may look more solid than rocket-like after the $S&P 500(.SPX)$ 's double-digit returns since January, solid earnings, the end of the Fed's monetary tightening and a strong economy will continue to boost U.S. stocks in the coming months.
While return expectations should be more moderate, healthy earnings growth and a wide dispersion of valuations suggest that the market environment remains favorable for stock performance, offering opportunities for excess returns.
They advise investors to buy a mix of blue-chip stocks, value stocks, and growth stocks.
Fed officials previously predicted only one rate cut in 2024, lower than traders' expectations this year, and the S&P 500 index ticked up modestly.
Nonetheless, the US stock market benchmark index remains near historic highs, driven by optimism that the Fed's next move will be a rate cut and the continued enthusiasm for AI technology, propelling large tech stocks like $NVIDIA Corp(NVDA)$ $Microsoft(MSFT)$.
AI poses a risk to the outlook
Kelly and his team noted that unlike last year, when the market was strong, the market breadth is also improving, and a wider earnings recovery is helping to lift stocks beyond just the tech giants. Data shows that all sectors of the S&P 500 index, except real estate, have seen gains this year. In contrast, only 5 out of 11 sectors of the index rose in the same period last year.
The strategists wrote that AI poses a risk to the outlook, with only a few companies leading market enthusiasm, and the timeline for AI adoption remains uncertain. Another factor is slowing economic growth, which could impact profit margins if corporate pricing power is under pressure.
However, they don't think these concerns are serious, unlike $Morgan Stanley(MS)$ 's bearish market strategist Marko Kolanovic, who continues to sound alarms about a possible stock market crash.
In the end, JPMorgan's asset management strategists wrote:
"The end of monetary tightening, coupled with robust growth in nominal GDP, provides a constructive backdrop for US stocks for the rest of the year."
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