One of Wall Street’s biggest bears is turning bullish on the stock market for the first time in 2 years

• JPMorgan’s top strategist had something positive to say about the stock for the first time in a while.

• JPMorgan chief equity strategist Dubravko Lakos-Bujas said investors should be less defensive.

• “While it is too early to assume that this is a turning point, it does suggest that a recession is unlikely in the near term.”

JPMorgan strategists are bearish on the stock market since October 2022.

But that appears to be changing, based on a Tuesday note from JPMorgan’s chief global equity strategist Dubravko Lakos-Bujas.

While Lakos-Bujas did not update his company’s year-end S&P 500 price target of 4,200, implying a steep 27% downside from current levels, he advised investors to become less bearish on market.

“We are neutralizing our long defensive and short cyclical view,” Lakos-Bujas said.

Federal Reserve Cuts Interest Rates and China Unleashes New Stimulus Drives Lakos-Bujas’ Sentiment Change.

“The policy support from the world’s largest economies comes at a time of surprisingly resilient U.S. growth, with tight labor markets, ongoing government deficit spending and record levels in stocks, credit and housing,” Lakos said -Bujas.

The bank also highlighted the robust health of US consumers, who have collectively added $50 trillion to their wealth since Covid.

According to data from the Federal Reserve, American consumers have about $185 trillion in assets, mostly stocks and bonds, homes and cash, and just $21 trillion in debt. This is a healthy balance sheet.

Lakos-Bujas is also encouraged by solid corporate earnings growth, which is expected to accelerate from 3% in the past two years to 12% in the next two years.

“US corporations have increasingly focused on recycling pre-tax earnings into investment spending rather than returning after-tax profits to shareholders through buybacks, which also helps stimulate the economy,” he explained Lakos-Bujas.

Part of this has been driven by the artificial intelligence technology boom, and megacap tech companies are expected to accelerate their R&D and investment spending to more than $500 billion a year.

“In our view, these factors, along with US exceptionalism, are helping to offset uneven macro weakness,” Lakos-Bujas said.

He added: “While it is too early to assume that this is a turning point, it does suggest that a recession is unlikely in the near term, especially as surprisingly strong job growth and a drop in the unemployment rate have interrupted a slowing trend in the labor market”.

The story continues

But Lakos-Bujas hasn’t become completely bullish on stocks. The strategist warned that November’s presidential election could inject volatility into markets depending on the outcome, and lower interest rates could be a headwind for corporate profits, particularly in the financial sector.

Read the original article on Business Insider