U.S. stocks are poised for a robust rally leading into year-end, according to JPMorgan Chase & Co. (JPM, Financial), with expectations of stronger performance compared to the end of 2016. Bolstered by the re-election of Trump, the market is predicted to benefit from weak economic growth in the U.K., E.U., Canada, and Mexico.
Andrew Tyler, head of U.S. Market Intelligence at JPMorgan, highlights that tech giants' strong performance will continue to drive the market. He forecasts that financial stocks will emerge as the best-performing sector in the S&P 500 index by year-end. The index recently broke the 6,000-point mark for the first time and recorded its best weekly performance in 12 months, reflecting investor optimism about Trump's presidency favoring U.S. businesses.
Tyler reaffirmed a tactical bullish view, recommending a "barbell strategy" until the end of 2024. However, he advises caution in the energy sector due to disappointing quarterly results. Many Wall Street professionals share this positive outlook, partly because the U.S. election removed uncertainty and ushered in a favorable seasonal period for stocks.
Morgan Stanley strategists, led by Mike Wilson, expect the post-election rally to continue, especially for financial, industrial, and cyclical commodity stocks. Oppenheimer Asset Management raised its year-end S&P 500 target to 6,200 points, a record high for Wall Street. Evercore ISI analysts also note that the U.S. bull market is just beginning.
No predictions extend to 2025 due to heightened risks associated with Trump’s policies, which could lead to inflation and potentially slow the Federal Reserve’s rate cuts. Rising U.S. Treasury yields could limit future stock market gains, with the S&P 500 having surged 50% over the past two years and reaching a historically high price-to-earnings ratio.
Though JPMorgan’s trading department is bullish in the short term, the firm's equity research strategists warn that a near 5% yield might challenge the performance of risk assets next year.
