Equity strategists at J.P.Morgan reiterated their ‘bullish’ stance on cyclical areas of the market but warned clients away from growth stocks, telling them that current weakness in that space might not be an opportunity.
“While geopolitics could flare up into month end, we do not expect this to last, and call for risk-on internals to resume into spring,” equity strategists led by Mislav Matejka said.
“We stay bullish on Banks, Mining, Energy, Insurance, Autos, Travel and Telecoms.”
As for Technology, the key driver would be the direction of bond yields.
“If bond yields show a more persistent upside, then the large valuation premium that Growth sectors have over Value will keep reducing,” Matejka said in a research note sent to clients.
Indeed, real interest rates, that is, once adjusted for inflation, could end up rising “significantly”, perhaps to 100 basis points or more.
Thus, a peak in inflation might result in a short-term tactical bounce, but just that, he added.
