JPMorgan Analysts: Equity and Credit Markets Not Reflecting US Recession Risk
In a recent report to clients, JPMorgan analysts highlighted a concerning trend - despite growing fears of a US recession, equity and credit markets are not pricing in the recession risk. While bond and commodity markets are showing signs of elevated recession risks, equities and credit markets remain relatively optimistic.
The analysts noted that market positioning is key, with global non-bank investors holding strong positions in equities, indicating confidence in the stock market's resilience. However, momentum-based investors are more cautious, with modest long positions in the US and neutral positions in other regions.
On the other hand, bond positioning tells a different story. Institutional and non-bank investors are leaning towards long-duration positions, signaling their concern about recession risks and the potential for further interest rate declines.
Commodities also reflect a more cautious economic view, with depressed commodity positioning indicating higher recession risk. As the US labor market report approaches, JPMorgan emphasizes the contrast between the optimism in equity and credit markets and the caution in bond and commodity markets.
In conclusion, while equities may suggest little recession risk, investors should be mindful of the signals from bond and commodity markets. Understanding these market dynamics can help individuals make informed decisions about their investments and financial future.