JPMorgan Co-President warns of 40% correction in stocks – is he too pessimistic, or bearish?

by | 9 Mar, 2018

 

JPMorgan Chase Co-President Daniel Pinto thinks the stock market is set for a 40 percent fall in the next 2-3 years, a move down which would end up wiping out the last 2 year’s of gains in the market rally stateside.

Speaking to Bloomberg Television, Pinto said: “We know there will be a correction at some point”. He added: “We are at an interesting time. We are 2-3 years probably until the end of the cycle and markets are going to be nervous. Nervous to anything that relates to inflation, nervous to anything that relates to growth. And I think tariffs – if they go a lot beyond what has been announced – it is something that will concern markets about future growth.”

These are big ‘ifs’ though. Trump wont necessarily escalate trade action at a more rapid rate. Indeed, as you can read in the final paragraph of this article, the administration has left the door open for other countries to adjust their own trade practices in return for tariffs being modified or removed completely. If other nations including China stop flooding the market with so much cheap steel, helping the U.S. to address its colossal trade deficit, Trump may be willing to soften more, and this would be another major boon for the markets, which are already starting to benefit from the Republican tax reform package passed in December last year.

So much depends on whether trade relations deterioriate further, and whether other leaders including China’s Xi Jinping are willing to concede to a more aggressive U.S. trade policy, or fight back even harder. Given how much both countries depend on eachother economically, its more likely that both leaders will be pragmatic over the issue, but if they aren’t, then Pinto’s forecast could come true.

For now though, even despite worries concerning inflation, the speed of Federal Reserve interest rate rises, the withdrawal of monetary easing and the prospect of another major correction in the markets like the one we saw in late January / early February, stock prices keep rising and indices keep moving upwards. The chart below shows how quickly the benchmark S&P500 index is recovering after that sharp fall earlier this year, even with all the noise in the press about chaos in the White House and warning signs in the economy. 

Robust financial results for American companies through the first quarter of the year show us that the underlying fundamentals of the U.S. economy are strong, which is why investors keep buying back in. By February 8th this year, 322 S&P500 companies had reported quarterly results during the latest earnings season, and 78 percent of them beat Wall Street estimates. According to Thomson Reuters data, that was the best rate of above-estimate earnings since Q3 2009!

Besides this, the latest labour market data released today showed the U.S. economy added 313,000 new jobs in February, the biggest gain since mid-2016 and a reflection of the strongest labor market in two decades. 

Then there’s the North Korea breakthrough – whereby Trump is set to meet Kim Jong Un in May, the first ever meeting between a sitting U.S. President and sitting DPRK leader in history. If relations between the 2 were normalised, this would be a huge relief to Asian stock markets and those in the U.S. boosting investor sentiment even more. 

Overall, one could argue Pinto’s case looks a little bit too bearish considering the latest news, but anything could happen in the next year or 2.

Find out what Invstr CEO Kerim Derhalli thinks about the future for the markets in this article

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:

Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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