JPMorgan has upped its price target for the S&P/ASX 200, arguing a sustained correction in equity markets is “unlikely” and investors should continue to ride the reflation wave and momentum in cyclical sectors.
In new research today, the broker’s Sydney-based strategist Jason Steed said while many in the market appeared fearful of the strong gains for global equities in the past year, there were several reasons to remain positive.
The S&P 500 index in the US is up more than 10 per cent year to date, while Australia’s S&P/ASX 200 index is up more than 6 per cent. The MSCI All World index has risen more than 8 per cent, compared to the average gain in the first four months of the year since 1990 of 3.19 per cent.
“We sense that some in the market are fearful that the extreme gains is pushing us towards metaphorical event horizon for equities,” Mr Steed wrote.
“Our view, both locally and globally, is that gains will be modest from here, but we don’t believe a sustained correction is imminent.
“Numerous factors underpin our stance, such as still climbing activity levels, ongoing fiscal and monetary support, very high savings rates and positive earnings plus dividend momentum.”
The upbeat view saw Ms Steed’s team raise the broker’s December 2021 S&P/ASX 200 to 7500 points, up from 7000. A key factor in the upgrade, he said, was the “market lift” in the broker’s analysts profit forecasts for the coming year, which are above consensus expectations.
In their “model” portfolio, JPMorgan’s team upped their key overweights in the financial and material sectors and also lifted consumer discretionary and industrials to overweight.
“We believe the settings for global reflation remain firmly in place, both locally and globally,” Mr Steed said.