JPMorgan Thinks The Worst Could Be Over

JPMorgan Thinks The Worst Could Be Over

almost 4 years ago2 mins

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Several stock indexes re-entered “bull market” territory late last week – and investment bank JPMorgan thinks many investments should have now witnessed their lowest price points. But there may still be a sting in the tail… 🦂

What does this mean?

JPMorgan set out a series of conditions for market stabilization – including a big drop in investment prices and massive economic stimulus from central banks and governments. And as every Finimizer knows, those have now happened.

The bank’s analysts acknowledge that volatility will persist in risky markets until investors get certainty around the depth and duration of the coronavirus-induced recession. Nevertheless, they state that most markets (bar oil and some heavily indebted emerging economies’ currencies) have “probably” gone as low as they’re going to – and that their values should increase in the coming quarter.

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Not everyone agrees. The experts over at rival Goldman Sachs think things still have further to fall, absent evidence of both antiviral lockdowns and economic stimulus actually working. And others point out that analyzing past bear markets shows them nearly always “retesting the bottom” 🍑

Why should I care?

If JPMorgan is to be believed, dollar-cost-average investing is currently a good idea (if, indeed, it ever wasn’t). That’s especially true when it comes to bonds, which central banks have pledged to buy up in bulk and whose future prices should reflect that demand. Check out our Packs on Government Bonds and Corporate Bonds for more on getting into these markets.

US bonds are typically quick to recover from recessions
US bonds are typically quick to recover from recessions

But JPMorgan’s analysis appears to be based on the belief that this recent bear market was simply an event-driven occurrence – one which, according to Goldman Sachs, should lead to investment prices recovering fully within around 15 months.

If, on the other hand, measures to protect both individuals and the economy from the effects of coronavirus fail, then investments could experience a structural bear market – which typically involves a 57% fall in prices that takes 111 months for investors to recoup… 😬



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