JPMorgan executive director Adam Crisafulli has high hopes for the stock market, but only if the powers-that-be make the necessary moves.
“The ‘shock and awe’ upside scenario involves rescinding all U.S.-China tariffs instantly, causing certain tariff-sensitive firms to raise 2019 guidance, while the Fed commits to keeping reserves at ~$1.3T+. If all this were to come to pass, then the SPX will easily make a run towards 3K.”
For Crisafulli’s bullish outlook to play out, the S&P 500 index SPX, -0.28% would need to tack on more than 200 points, or about 7%, from its current level, according to his note to clients cited on CNBC on Wednesday.
The Fed still has not decided on the amount of bank reserves that will be held on its balance sheet. Lewis Alexander, chief U.S. economist at Nomura Securities, said reserves are likely to end up at $1.1 trillion from the current level of $1.6 trillion.
More color is expected from the FOMC’s meeting in March.
As for Trump and China, there’s a sense among Wall Street analysts that, even though the president has abandoned plans for new tariffs on Chinese goods, the stock market will suffer if the existing tariffs aren’t removed.
Crisafulli, however, acknowledged that the combination of the Fed pivot, better corporate earnings and easing China trade tensions are mostly baked into the S&P 500 at its current levels.
“There are scenarios whereby these issues could still surprise on the upside but the odds of them unfolding don’t seem great,” he wrote.
At last check, the Dow DJIA, -0.27% and the S&P were trading lower, while the Nasdaq COMP, -0.29% was leaning higher.