The stock market could rally stronger into the end of the year following Republican Donald Trump’s presidential election victory than it did when he won the US presidency eight years ago, according to JPMorgan Chase & Co.’s trading desk.
“I expect 2024 returns to be larger than 2016,” Andrew Tyler, the bank’s head of US market intelligence, wrote in a note to clients Monday. A big advantage for the S&P 500 Index is weakness outside the US, with China, the UK, EU, Canada and Mexico all experiencing softer growth than they did back then.
Strength in the so-called Magnificent Seven technology stocks will continue to propel equity markets, while financials will be the best performing S&P 500 sector through the end of the year. The call comes after the broad equities benchmark posted its best week in the last 12 months, driven by investors’ belief that a Trump presidency will be good for Corporate America.
Tyler reiterated his tactically bullish view and recommends a barbell approach to play the rally through the end of 2024. He’s cautious on energy due to a disappointing earnings season for the segment.
The note didn’t speculate on what will happen in 2025, however, where bigger risks lie ahead. The Federal Reserve is moving cautiously on interest rate cuts, in part because many of Trump’s policies, from deporting undocumented workers to stymieing trade through protectionist tariffs, are considered inflationary.
With Treasury yields back on the rise, they could put a lid on future equity gains, as the S&P 500 is up 50% in the past two years, trading above 6,000 for the first time ever, and valued at 23 times projected earnings, about 40% more than its average since 2000.
JPMorgan’s trading desk isn’t alone. Many Wall Street pros are bullish about the stock market heading into the end of the year. Part of the reason is simply that the US election removed a hurdle of uncertainty and now equities are entering a seasonally positive period.
On Monday, Morgan Stanley strategists led by Mike Wilson said the post-election stock rally that kicked off last week is on track to continue, particularly in shares of financials, industrials, and commodity cyclicals. At Oppenheimer Asset Management, chief investment strategist John Stoltzfus lifted his year-end S&P 500 target to a Street high of 6,200. And Evercore ISI’s Julian Emanuel said last week that the bull market in stocks was just getting started.
That said, even As JPMorgan’s trading desk shared its near-term bullish view, the bank’s equity research strategists, who represent the house view, were already warning that yields approaching 5% will be a hurdle for risk assets going into next year.