JP Morgan sees little upside to global equities

6th Jun 2016 09:00

(ShareCast News) - Forecasts for economic growth Stateside to pick-up in the backhalf of 2016 might be too optimistic and low levels of volatility pointed to investor complacency, strategists at JP Morgan argued, going on to tell clients that the up-side for equity markets was therefore limited.In particular, strategist Mislav Matejka highlighted the relationship between corporate profits and the flow of economic data.Matejka also pointed out the record-low reading for business expectations within the US services sector purchasing managers´ index."There is an almost unanimous view among the economists on the Street that US activity will accelerate from the 1% run rate seen over the past 6 months towards 2-2.5% pace in 2H. Our concern is that this might end up being too optimistic," he said in a research note sent to clients.Even under the consensus assumption for S&P 500 earnings of $32 in the last quarter of 2016, that would still leave the benchmark´s price-to-earnings multiple at 17.8, he said.The strategist also referenced other factors which made him wary of the current market backdrop, including the failure of bond yields to move higher, the "uncomfortably flat" yield curve and the still "challenging" backdrop in China.The strategist said his key global picks remained Real Estate, Telecoms and Utilities. He also downgraded his stance on so-called Discretionary stocks from 'overweight' to 'underweight', while upping Energy from 'neutral' to 'overweight'.Discretionary had been the best performer since 2009 in both the US and Europe, he said.Overall, JP Morgan´s stance on global equities continued to be 'underweight'.