Stocks are close to the bottom and can expect support from central bankers softening their tone, top JPMorgan strategist says
- Global stocks are unlikely to fall much further after the recent sell-off, a JPMorgan Asset Management strategist has said.
- Karen Ward said central banks are likely to soften their tough talk on inflation as growth slows, supporting markets.
Global stocks are unlikely to fall much further after the brutal sell-off during the first five months of the year, a senior JPMorgan Asset Management strategist has said.
Karen Ward, the top European market strategist at JPMAM, told a conference in London on Wednesday that the recent slowdown in growth means central banks should dial down their tough talk on inflation.
She also said governments are likely to inject stimulus, and said both moves should support stocks in the second half of the year.
"Markets have already moved a long way," Ward said. "We have seen the worst performance of the S&P 500 at the start of the year for multiple decades. It's now down around 15%, it's a little less in Europe."
"We're not worried about substantial further downside," Ward said.
The JPMAM strategist said the key question for investors was whether the current sell-off would turn into a prolonged decline that saw stocks fall between 30% and 50%.
She said such a drop is unlikely, in part because markets are likely to be boosted by a softening of the tone from central banks, which have been keen to stress that they're going to crack down hard on inflation.
"They're talking the talk at the moment. They have to. Inflation is elevated," she said. "But as the economy slows, we think we'll hear a more soothing tone from the central banks. So policy will start to help out in the second half of the year."
She also said governments have lost their fear of debt throughout the coronavirus crisis and will not be afraid of supporting economies as they slow.
In the UK and Europe, governments have stumped up more economic support as inflation has roared, even at the risk of further stoking price rises. In the US, the Biden administration is weighing slashing Trump-era tariffs on China in an effort to cool prices.
Ward added that there is so far little sign of the sort of excessive investment in the economy that can cause companies problems and lead to deep recessions when growth slows.