JPMorgan strategists believeWestclashfreespinThe three-week decline in US stocks is not over for a number of reasons, including rising bond yields, high oil prices and high concentration in the stock market.
Marko Kolanovic, the bank's chief market strategist, and others wrote in a note to clients on Monday that about 40 per cent of US companies by market capitalisation reported this week that price changes might depend on results and could stabilise in the short term, "however, we believe the sell-off will continue".
Kolanovic representsWestclashfreespinHe worries about complacency about stock valuations, stubbornly high inflation, further adjustments to Fed interest rate cuts and overly optimistic profit prospects.
"the current market narrative and model is becoming more and more like last summer, when higher-than-expected inflation and hawkish Fed corrections pushed a correction in risky assets, but investor positions now seem to be higher," strategists wrote.
A stronger dollar, higher yields and equity concentration all show high risk.
Kolanovic said the situation in which traders were unable to identify potential negative factors in the stock market earlier this year was beginning to change.
Kolanovic said it was time to consider buying Japanese consumer-related stocks as real wage growth was expected to push up personal consumption and share prices in Japan.
Note: Kolanovic's view of the US stock market has failed to materialize for two years in a row.