A quickie note overnight from JPMorgan on their US equity outlook:

  • Even aside from the debt ceiling issue, we maintain that the risk-reward for equities is poor given the elevated risk of recession, stretched valuations, high rates and tightening liquidity, and we favour cash over equities at the former’s ~5% yields
  • A divergence remains between rates markets that expect the Fed to cut this year, equity markets that interpret those potential cuts as positive for risk, and the Fed’s more hawkish rhetoric
  • This gap is likely to close at the expense of equities, as rate cuts will likely only transpire from a risk-off event, and if rates stay higher they should weigh on equity multiples and economic activity
Goldman Sachs outlook for the Fed is here:  Q1 2022 taper, rate hike 2024