“Growth should come in above trend in the coming quarters, driven by healthy consumer and corporate activity,” JPMorgan strategists led by Dubravko Lakos-Bujas wrote in a commentary.
In addition, “we believe investor positioning is too bearish — the market has taken the hawkish central bank and bearish omicron narratives too far,” they said.
“While some technical adjustment in central bank policy is warranted, we do not think the Fed is behind the curve and see a compelling case for inflation pressures normalizing in coming months and quarters.
“Also, we do not expect omicron to impact the growth outlook in any significant way,” the analysts said. “Rather it is likely to accelerate the end of the pandemic by crowding out potentially more lethal variants.”
Given all that, they see opportunities:
“(1) on the value/cyclical side, in particular reopening stocks (such as travel, leisure, hospitality, experiences) and energy; and
“(2) on the secular growth side. Various high-beta segments (such as payments, e-commerce, gaming, cybersecurity, biotech) have already seen significant multiple de-rating, yet fundamentals for many of these themes remain intact.” High beta stocks are ones that have greater sensitivity than the broader market.
Meanwhile, “historical analysis (30-plus years) shows that the largest outperformance of high-beta stocks tends to be in January (i.e., tax-loss harvesting, investor bottom fishing, etc.),” the analysts said.
“We expect the upcoming January effect to be even more pronounced this time around, given extreme positioning and sentiment.”