UNITED STATES (OBSERVATORY NEWS) — In a note released late last week, JP Morgan said it is time to buy the drop as the bank believes the impact of the coronavirus is “probably temporary” and that the Reserve federal government will come to the rescue of the markets.
JPMorgan (NYSE: JPM ) is therefore sticking to its bullish market forecasts, with an end-of-year target for the S&P 500 of 3,400 points, betting on “possible Fed insurance cuts” to go up the actions. The target represents a 15% increase over last week’s closing price.
“While it is easy to become cautious in the market after a drop of around 10%, we argue that investors should not overlook the advantage of both announced and unannounced global policy responses that are likely to survive the COVID-19 impact, “said Dubravko Lakos-Bujas, JPMorgan’s chief US equity strategist.
In the midst of the market rout, traders are increasingly setting prices based on a reduction in rates in the coming months. Investors take into account an almost 100% probability that the Fed will lower its rates at its next meeting in March.
“Possible cuts to the Fed’s insurance rates at a time when the US job base is close to full employment and when the participation rate of young people is rising could drive the economy once the impact COVID-19 will be gone and the stimulus will stay in place,” said Lakos-Bujas.
JPMorgan’s opinion is more optimistic than that of some other major Wall Street banks. For example, Goldman said Thursday that it is now seeing zero profit growth for US businesses this year due to the epidemic, although the bank also anticipates Fed rate cuts of 1% in total in 2020, including a rate cut on 0.
However, for its part, JPMorgan thinks that the current fall will only be short-lived because it thinks that the decline in stocks is also partly caused by the rise of Senator Bernie Sanders in polls relating to the US presidential election.
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