JPMorgan shifts to cautious outlook on US stocks after Fed remarks

JPMorgan Chase just went from bullish to “tactically cautious” on US equities, and the reason is a single speech. Federal Reserve Chairman Kevin Warsh used his Jackson Hole appearance to remind markets that the central bank isn’t done fighting inflation, and traders heard him loud and clear. Market-implied odds of a September rate hike jumped to roughly 57% to 60% after Warsh’s remarks, up from a range of 35% to 40% beforehand. That kind of swing in expectations, weeks before the Fed’s September 16 policy meeting, was enough to make JPMorgan’s market intelligence team pump the brakes. What JPMorgan is actually saying Andrew Tyler, who leads JPMorgan’s market intelligence team, framed the downgrade as a response to near-term uncertainty about the Fed’s rate path rather than any deterioration in the economy or corporate earnings. The underlying fundamentals, by their assessment, still look solid for the longer term. The federal funds rate currently sits in a target range of 3.50% to 3.75%, following what the Fed characterized as a “hawkish hold” at its late July meeting. Warsh’s Jackson Hole address reinforced the message that rates could move higher if the central bank’s confidence ...