Expectations are for a moderate drop, as per strategists.
Despite various global uncertainties causing tensions, like President Trump’s plans to ban the Chinese social media app TikTok and discussions about a new coronavirus stimulus package, the markets appear to be holding steady. Some significant companies such as Uber and Beyond Meat are experiencing growth and are scheduled to announce their Q2 earnings this week. However, the high level of uncertainty in the US economy has put everything on unstable ground, leading JPMorgan to suggest that a market correction may be on the horizon if circumstances change.
According to JPMorgan’s insights provided to MarketWatch, the upcoming release of crucial economic data, such as payrolls and retail sales, will influence market confidence. If the data falls short of expectations, analysts may need to adjust their strategies. Nevertheless, JPMorgan emphasized that while a correction is probable, there’s no cause for alarm.
“Some concerns are valid due to a somewhat uncertain macroeconomic situation, but not enough to advocate for bearish targets or a defensive investment approach,” stated JPMorgan strategists.
“A significant correction of around 10% would be difficult to trigger when equity position measures for most hedge funds are below average,” they further added.
The potential market correction is somewhat offset by the ongoing stimulus negotiations. The Congress is still in the process of finalizing an agreement on the new stimulus package known as the “HEALS” Act. The issue of expired extended unemployment benefits is a major point of contention, with Democrats pushing for a full reinstatement and Republicans aiming for reduced benefits to incentivize job seeking. On the other hand, the promise of a second round of $1,200 stimulus payment in the HEALS Act, if passed on time, is highly likely. JPMorgan analysts believe that the prospect of a new $1 trillion stimulus will maintain market optimism sufficiently to prevent significant losses from any correction.
At the market opening today, Dow futures showed a 0.4% increase, S&P 500 rose by 0.5%, and Nasdaq experienced the highest climb at 0.9%.
