Global Stocks Can Keep Rallying, JPMorgan Says. But Don’t Expect Much for the U.S.

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Despite its stance on U.S. stocks, J.P. Morgan’s overall view for equities in 2022 is positive.

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Positive catalysts for the stock market “are not exhausted” and further gains could be ahead for equities in 2022, according to J.P. Morgan strategists.

The bank’s global equity strategy team sees the good times rolling on for global stocks but has opted for a neutral position on U.S. equities. The Dow Jones Industrial Average and the S&P 500 were both on track to open at record highs on Tuesday, as the momentum to start 2022 continued. J.P. Morgan strategists warned the rally “could stall relatively if the tech outperformance starts to wane.”  

They are overweight on eurozone and U.K. stocks, noting that the FTSE 100 should be helped by a potentially weaker British pound.

Despite their stance on U.S. stocks, their overall view for equities this year is positive. “Stay bullish—positive catalysts are not exhausted,” strategists, led by Mislav Matejka, said in a note Tuesday.

“We believe there is further upside for stocks, despite a strong run so far,” they said, reiterating their view that the dip driven by Omicron coronavirus variant concerns last month should be bought into. In addition, the Federal Reserve is unlikely to turn more hawkish in the first half of the year, the team noted.

Fourth-quarter earnings season, set to begin in the coming weeks, could be another catalyst, they added, expecting “strong beats.”

“We continue to see gains for earnings, and believe that consensus projections for 2022 will again prove too low. Q4 of 2021 EPS [earnings per share] is expected by consensus to be sequentially below Q3, which doesn’t typically happen.”

When it comes to sectors, the strategists remain overweight on energy, citing close to record cheap valuations and better earnings revisions in recent months, and mining as “China growth momentum is likely bottoming out.”

They are also overweight on autos, with pent-up demand expected to improve sales, as well as hotels, restaurants, and leisure as consumer habits begin to normalize. Banks and communication services were also given overweight ratings.

Write to Callum Keown at callum.keown@dowjones.com