JPMorgan traders are bearish, see no off-ramp for Iran conflict
An end to the U.S.-Iran war isn’t on the horizon, leading JPMorgan traders to turn more negative on the market. “We are now Tactically Bearish,” they wrote to clients. “There has been a lack of extreme de-risking with positioning currently neutral. Further, Energy was the most net-sold sector last week as investors took profits into the weekend where, presumably, they were expecting de-escalation.” Stock futures tumbled and crude prices soared Monday as several oil-producing countries began curbing their output due to capacity and shipping constraints. West Texas Intermediate futures briefly topped $110 per barrel, reaching levels not seen since Russia invaded Ukraine in 2022. JPMorgan’s change in market view comes after its traders stayed “tactically cautious” early last week despite investors seemingly buying the dips. At the time, they said: “Given the extreme moves globally, we should see a relief rally but think that is something the market will fade until there is a defined off-ramp which is difficult to visualize given the shifting U.S. objectives, lack of known (to the market) Iranian leadership and ongoing escalation.” Looking ahead, the JPMorgan traders like defense stocks, oil refiners and grocery companies. They are also long crude, natural gas and energy producers. Elsewhere, Morgan Stanley’s Mike Wilson is more sanguine on stocks. “We think we’re closer to the end of this rolling correction than the beginning and remain constructive over the next 6-12 months,” the bank’s chief U.S. equity strategist wrote. “The pace of increases in oil and the dollar will determine how long volatility persists. U.S. equities are in a favorable position versus international markets.” JPMorgan traders themselves, allowed for the same relative optimism — if there’s a route away from the present crisis. “A definitive off-ramp to the conflict will end this tactical call as the underlying macro fundamentals remain supportive of risk-assets.”
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