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JPMorgan estimates that the market correction will be about half completed



(Bloomberg) – A number of indicators, including investor positioning prior to the recent market downturn, suggest that the drawdown is about halfway closed and, according to JPMorgan Chase & Co, less painful than the router last December will prove. analysis.

"As the corrections are usually the largest, when the markets are expensive and over-obsessed and the market depth is low, these indicators give a sense of vulnerability, even though they can not predict the timing of a random shock," said John Normand, head of JPMorgan's cross-asset fundamental strategy, wrote on October 4. "At the beginning of October, the vulnerabilities were more mid-size than high."

While the S & P 500 index rose on Friday after a report on employment that showed that attitudes continued to slow, stocks were on Tuesday and Wednesday's first pair decline of more than 1% this year thanks to a variety of weaker data. US futures fell again on Monday in London.

"A recession is avoidable, but recurring drawdowns are not," Normand wrote. He owes this to President Donald Trump's "impulsiveness and scope for miscalculation in using untested political instruments such as tariffs, export bans and capital flow restrictions."

Since market starts that began in early 2018, pain has since weighed down to 20%, JPMorgan said. The total return on the index during this period is less than 2 percentage points more than cash.

Prior to the current drawdown, the JPMorgan analysis revealed that the positioning was "relatively neutral to defensive" Assass's portfolio showed that "overshooting" was modest compared to what global growth normally implies Normand. In the meantime, market depth – or the degree of reliance on just a small group to make profits – is "below average" for US equities, but as positioning poses no extreme issues, he concluded.

"The message For all indicators, this correction is about halfway completed and should turn out to be much flatter than last year. "

He warned that" the big rotations that many hope for, "such as bonds and stocks or stocks from developed to emerging markets and defensive to cyclical markets, should be an important stimulus. Think of a much greater easing of the Federal Reserve, a reduction in tariffs, or significant tax incentives from Germany and China.

(Adds a reference to the London trade in the third paragraph.) In Tokyo at [email protected]

To contact the editors responsible for this story: Christopher Anstey at [email protected], Joanna Ossinger [19659011] For more articles like this, please visit us at bloomberg.com

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