JPMorgan: Market recovery to take place once US contains coronavirus

JP Morgan has projected that the S&P 500 would reach 3,400 in early 2021 which would beat the all-time high of 3,386 on February 19.

The White House is currently pushing more than $1 trillion worth in government stimulus to weaken the coronavirus’ economic impact as US cases continue to rapidly increase.

On March 12, the S&P 500 entered a bear market due to the coronavirus slowing down economic growth and prompting businesses around the world to close shop.

However, Dubravko Lakos-Bujas, chief US equity strategist at JPMorgan, sees a possibility for stocks to recover to record levels.

“Acknowledging that equity markets globally are now down 30%-50% from their recent highs and that investor positioning has become increasingly favorable, we see an asymmetrical return profile for equities with upside significantly higher than downside over the next year,” Lakos-Bujas in a CNBC report said.

In order for this scenario to play out, Lakos-Bujas also suggested that aggressive fiscal policy should be immediately implemented by passing a comprehensive fiscal package.

Stimulus package may reach up to $2 trillion

Earlier this month, the Trump administration announced a fiscal package to remedy the financial crisis. Due to recent developments, the US senators are now pushing their efforts to deploy more than $1 trillion in the emergency stimulus package.

Senators, the majority from the bipartisan groups, worked late Friday night to secure a final agreement that would cost $1.5 trillion before falling short of a midnight deadline imposed by Senate Majority Leader Mitch McConnel.

Larry Kudlow, the director of the National Economic Council, estimated that the overall scope of the emergency stimulus package could reach more than $2 trillion which is twice the size of the White House proposed days ago. He further added that the package is also equal to 10% of the US GDP.

Bank of America also reported that unemployment claims next week could total three million and hospitals are facing shortages in equipment and staff during this crisis.

US coronavirus cases and death toll escalate

Cities have shut down all nonessential businesses to contain the virus, with New York and, California being the largest cities affected by the virus. Over 400 people have died from the novel coronavirus. 

JP Morgan projects recovery of S&P 500

New York state governor Andrew Cuomo estimated the 40% to 80% of residents could get the coronavirus over the course of the pandemic. 

“All we’re trying to do is slow the spread, but it will spread. It is that contagious,” Cuomo told CNN.

The majority of state governors already advised residents to stay at home to prevent the spread of the coronavirus. As for New York, California, and Washington which have the highest cases, President Trump has deployed the National Guard to strengthen efforts to contain the virus.

If the coronavirus is not contained soon, the prediction of a market rebound may not arrive in the near future. As of this writing, the current total of cases for coronavirus in the US has reached 34,755.

Chart image courtesy of Worldometers

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