JPMorgan's trading department believes that the strong performance of artificial intelligence darling Nvidia and steady economic growth mean that the S & P 500 may have room for further gains.
"As the AI theme continues to work, macro assumptions remain unchanged,decisionrouletteWe are likely to continue to hit new all-time highs,"a team including Andrew Tyler, head of U.S. market research at JPMorgan, wrote in a note to clients. He believes that GDP growth will be at or above trend levels, positive results, and the Fed's inaction are all recipes for a bull market.
The S & P 500 index edged higher on Thursday and is on track to hit a record high for the 25th time this year after Nvidia gave a better-than-expected sales forecast that pushed the company's share price past the $1000 mark. The index has risen more than 5% this month, driven by strong performance from U.S. companies and expectations that the Federal Reserve will cut interest rates before the end of the year.
Chip maker Nvidia was the main driver of stock market momentum, with shares rising about 10% after announcing optimistic sales forecasts. The company has contributed about a quarter of this year's S & P 500 gain.
JPMorgan traders believe the benchmark index will continue to rise, but at a slower pace, as investors look for artificial intelligence stocks in smaller market segments and the rally expands beyond ultra-large technology stocks.
Tyler recommends a "dumbbell" portfolio strategy, consisting of the so-called "technology giants" and semiconductor companies, as well as value and cyclical stocks such as banks, credit cards, automakers and suppliers, and home builders.
This optimistic view once again contradicts the bank's chief market strategist Marko Kolanovic. Kolanovic said a few days ago that he did not currently view stocks as an attractive investment given a range of risks including high valuations, stubborn inflation and geopolitical uncertainty.