Monday's rout has been followed by a small bounce, but no doubt nerves have been rattled. JPMorgan sees plenty of beaten-down stocks ripe for the picking.
Stock futures are looking up for Tuesday, perhaps a sign the market’s teflonlike tendencies that have helped it shake off crisis after crisis remain. Assets took a dive on Monday amid fears highly contagious coronavirus variants could thwart a “back-to-normal” economy.
“We remain constructive on equities and see the latest round of growth and slowdown fears premature and overblown,” said the JPMorgan team, led by Dubravko Lakos-Bujas. “Even though equity leadership and bonds are trading as if the global economy is entering late cycle, our research suggests the recovery is still in early-cycle and gradually transitioning toward mid-cycle.”
Consumer discretionary , semiconductors, banks and energy are “strong buys at current levels,” due to recent pullbacks that have created lots of “attractive opportunities.” The team noted that an increasing number of reopening stocks are 30% to 50% off first-quarter 2021 highs, with some even reversing back to June 2020 levels when COVID-19 uncertainty was worse.
While the prospect of bond yields moving lower is a risk for the overall market, the bank sees those normalizing and retracing higher into the second half of 2021. But it also warns that while all of the above sectors look attractive due to position unwinding by investors and a push into bonds, any reversal of those signals “could easily amplify moves in the opposite direction.”
A relatively light earnings day has Netflix NFLX, +0.37% in the spotlight, with the streaming-service provider set to report results after the close of markets. Meanwhile, the chief executive officers of media groups Comcast CMCSA, -1.60% and ViacomCBS VIAC, -1.04% reportedly met in recent weeks to discuss possible overseas streaming partnerships.
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