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JPMorgan’s quant guru breaks down why the ‘unprecedented’ dominance of US stocks is headed for a rude awakening
US stocks are dominating their peers in Europe and Asia to an “unprecedented” degree, JPMorgan says. But the firm warns that’s an unsustainable situation.
To best understand just how rare the ongoing divergence is, consider that momentum for US and European stock prices have gone in different directions just twice in the past 20 years. As it stands right now – and as the chart below reflects – when Europe is combined with Asia, the momentum split is the widest it’s ever been.
Before we get into what this means for the future of global stocks, let’s first assess what has led us to this situation in the first place.
JPMorgan’s quant guru, Marko Kolanovic- a man whose opinion is valued so highly that it can move markets – says the combination of share buybacks, comparatively tight monetary conditions from the Federal Reserve, and a strong dollar resulting from President Donald Trump’s trade war are the main fundamental factors driving US outperformance.
TARGET CEO: This might be the strongest consumer environment I’ve ever seen
American retailers are experiencing the best consumer environment in over a decade.
“There’s no doubt, that like others, we’re currently benefiting from a very strong consumer environment, perhaps the strongest I’ve seen in my career,” Target CEO Brian Cornell said on his company’s second-quarter earnings call on Wednesday.
Starbucks slides as Wall Street worries it’s run out of room to grow in the US
Starbucks slid 1.8% in trading Wednesday after Piper Jaffray cut its recommendation to “neutral” from “overweight,” citing a slowdown in US same-store sales.
“We believe the stock is range bound at best until U.S. trends improve,” analyst Nicole Miller Regan wrote in a note sent out to clients on Wednesday, per CNBC. “Our perspective is that there are issues around inconsistent results, credibility of guidance, and management transitions.”
Piper’s new price target is $US53 a share – down from $US60 in June, and $US70 for the better part of 2017. Wall Street’s average target if $US58, according to Bloomberg data.
In markets news
- Tech giants are seeing a profound split in fortunes, and Bank of America has devised a way to profit from their divergence
- One chart that shows why bitcoin won’t replace gold anytime soon
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