Key Points
- JPMorgan views the recent S&P 500 weakness as a correction rather than a trend reversal.
- The index fell 2.6% last week, bringing its year-to-date (YTD) performance to -1.3%. Analysts expect the S&P 500 to rise by 300 points to the upside.
- Strong macroeconomic data, robust earnings, and a de-escalation of trade tensions drive a bullish outlook.
- U.S. bond market volatility increased, while the dollar weakened by 2%, which aided international markets.
JPMorgan analysts maintain a bullish outlook for the S&P 500, projecting further gains ahead despite a sharp downturn in U.S. equities last week. The benchmark index dropped 2.6%, trimming its month-to-date gain to 4.2% and pushing its year-to-date return slightly into the red at -1.3%.
According to JPMorgan, this recent weakness is not a sign of a broader market reversal but rather a short-term correction. “We had flagged pullback risk and believe that we experienced that last week,” the analysts said in a note. With the S&P 500 still less than 6% from its all-time high, JPMorgan anticipates that the index is poised to move higher by another 300 points in the near term.
The firm bases its tactical bullish stance on three key factors: stable macroeconomic data, stronger-than-expected corporate earnings, and signs of easing tensions in global trade—particularly between the U.S. and the European Union.
Despite heightened market volatility, particularly surrounding the U.S. fiscal outlook, the broader macro picture remains constructive. The 10-year Treasury yield increased by just 3.4 basis points for the week, although it fluctuated within a volatile 20-basis-point range, and the MOVE index, which tracks bond market volatility, rose by 4.4%.
International markets, both developed and emerging, outperformed U.S. equities during the same period as the U.S. dollar weakened. The Dollar Index (DXY) declined another 2%, boosting overseas returns in dollar terms.
Looking ahead, JPMorgan points to upcoming earnings from Nvidia (NASDAQ:NVDA) as a potential market catalyst. As a key player in the artificial intelligence sector, Nvidia’s performance and outlook could significantly influence broader sentiment, particularly as global trade narratives continue to evolve.
While short-term risks persist, JPMorgan believes that the underlying market fundamentals continue to support an upward trend in equities.
