Next 300 points likely up for the S&P 500, says JPMorgan

JPMorgan analysts maintain a bullish outlook on the S&P 500, anticipating an upside of 300 points despite last week's 2.6% pullback, which they view as a temporary correction. The firm's tactical optimism is driven by stable macro data, positive earnings, and further de-escalation of trade war tensions; earnings from Nvidia are highlighted as a potential catalyst. International markets outperformed the U.S. last week amid a weakening dollar.

Analysis

JPMorgan analysts project a continued upward trajectory for the S&P 500, anticipating the "next 300 points" to be to the upside, despite a recent 2.6% weekly pullback that trimmed its month-to-date gain to 4.2% and pushed its year-to-date return to -1.3%. The firm views this decline, which occurred while the S&P 500 remains less than 6% below its all-time high, as a "brief correction" rather than a fundamental shift. This tactical bullishness is underpinned by expectations of stable macroeconomic data, positive corporate earnings, and further de-escalation in trade tensions. Market conditions last week were characterized by elevated volatility, evidenced by a 4.4% increase in the MOVE index and a 20bp trading range for the 10-year Treasury yield (which rose 3.4bps overall), alongside a 2% decline in the DXY, contributing to the outperformance of international developed and emerging markets over U.S. equities. Upcoming earnings from Nvidia are highlighted as a key potential catalyst, particularly relevant given the fluctuating U.S.-EU trade dynamics and broader investor sentiment that reflects unease over high stock valuations in 2024.

Key Decisions for Investors

• Consider JPMorgan's tactically bullish stance on U.S. equities, contingent on the materialization of their stated drivers: stable macro data, positive earnings, and trade de-escalation.
• Monitor Nvidia's upcoming earnings report closely, as it is flagged as a key potential catalyst for the S&P 500, especially in the context of technology sector leadership and evolving U.S.-EU trade relations.
• Acknowledge the recent rise in market volatility (MOVE index +4.4%) and investor apprehension regarding high valuations, suggesting a cautious approach alongside any tactical bullish positioning.
• Assess potential diversification benefits or direct investment opportunities in international markets, which demonstrated relative strength last week, supported by a weakening U.S. dollar (DXY -2%).