JPMorgan believes that the market is being optimistic with the corporate earnings forecast and expects downward corrections in earnings expectations. The US firm believes that while valuations have been lowered, it anticipates further revisions, leading it to underweight equities and warning that the market has not bottomed out yet.
During the presentation of its perspectives for 2023, the director of Strategy of JPMorgan Asset Management for Spain and Portugal, Lucía Gutiérrez-Mellado, has warned that these corrections will come from the margins, given that labor costs are going to translate in lower profits for companies, in an environment of lower growth and inflation. Despite this, she does not believe that there will be a fall like the one that occurred last year.
“We may reconsider it again when we see a little more stability in business results,” he remarked. The ‘horribilis’ 2022 has also affected fixed income, a segment in which they see investment opportunities during the first part of the year, although they opt for a neutral position. However, it is advisable to maintain the investment in order to be prepared for when the market consolidates the increases.
The war in Ukraine has conditioned the year 2022, in which the rise in prices and the shift in monetary policy by central banks have been the protagonists of the economy. Looking ahead to 2023, JP Morgan AM forecasts that the European Central Bank (ECB) will place interest rates at 3% (currently 2.5%), while the Federal Reserve may carry out one or two more increases, until placing them at 5% (current 4.5%), forecasts, in any case, subject to the moderation of inflation.
The manager stands out from most analysts and defends that central banks will wait a while before starting to lower rates. “Inflation is slowing down and should allow that, in contrast to last year, when the central banks only raised interest rates, this year the end of the increases is closer,” said Gutiérrez-Mellado.
In this regard, he pointed out that the growth of prices in the US could close at 3%, a “more comfortable” level for the US central bank, influenced by an underlying rate that reflects the fall in the price of goods thanks to the standardization of global production chains. In the Old Continent, the speed is different, since the rate that excludes energy and food continues to rise, which affects the price of goods, which register increases.
In this context, he sees a slight recession in Europe as likely given the symptoms of economic exhaustion that it has shown in the last quarter and after being “more resilient” than expected to the energy crisis. The United States is not ruling out this scenario either, although it is less likely, and could occur during the second part of the year.
