The consensus among “almost all economists” and the market supporting a soft landing leaves “any margin for error,” according to JPMorgan’s strategists.
“Crucially, unlike a year ago, when almost all economists and the market pricing had recession as a base case, both are in a soft landing camp now – perhaps one should be contrarian yet again,” the analysts said in a client note.
The banking titan anticipates that 2024 earnings projections are likely to move lower, while bond yields may have peaked.
The analysis factors in a contracting money supply in the U.S. and Europe, a strongly inverted yield curve, and potential weakening of corporate pricing power.
As a result, JPMorgan is recommending its clients stay overweight Japan, the UK, and Switzerland, neutral on emerging markets and the U.S., and underweight the Eurozone.
The strategists also suggest long positions in utilities and real estate compared to short positions in banks and autos, while maintaining an overweight position in telecoms and energy.