Stocks can return to records early next year if the US can curb coronavirus spread, says JPMorgan

Stocks can return to records early next year if the US can curb coronavirus spread, says JPMorgan
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  • Dubravko Lakos-Bujas, chief U.S. equity strategist at JPMorgan, expects the S&P 500 to reach 3,400 in early 2021.
  • That would top an all-time high of 3,386 set on Feb. 19. It is also 47% higher than the broad market average’s Friday close of 2,304.92.
  • “Acknowledging that equity markets globally are now down 30-50% from their recent highs … we see an asymmetrical return profile for equities with upside significantly higher than downside over the next year,” he says.

The S&P 500 could return to record highs by early next year if U.S. efforts to contain the coronavirus outbreak work and the government can quickly move forward with fiscal stimulus to cushion the impending economic blow, JPMorgan’s chief U.S. equity strategist said Friday.

Dubravko Lakos-Bujas wrote in a note to clients he expects the S&P 500 to reach 3,400 in early 2021. That would top an all-time high of 3,386 set on Feb. 19. It is also 47% higher than the broad market average’s Friday close of 2,304.92.

The S&P 500 entered a bear market on March 12 — bringing the longest-ever bull expansion to an abrupt end — as the fast spread of the coronavirus and resulting shutdowns soured economic and profit growth forecasts around the world. However, after the relentless selling wave, Lakos-Bujas now sees a chance for stocks to return to record levels.

“Acknowledging that equity markets globally are now down 30-50% from their recent highs, and that investor positioning has become increasingly favorable, we see an asymmetrical return profile for equities with upside significantly higher than downside over the next year,” Lakos-Bujas wrote.

For his scenario to play out, though, the U.S. government must pass a “comprehensive fiscal package promptly.”

Source: CNBC

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