This one's a little out of left field. Via a note from JP Morgan training desk that warns of the risk of 10% drop in the benchmark US equity index over the summer months in the US:
- could test 5,00
- potentially fall to around 4,800.
The three catalysts:
Buyers become exhausted
- "The combination of earnings season stock performance and narrowing market breadth points to a market that needs a new set of catalysts and/or reassurance about the prevailing market narrative,"
- in-line macro data, along with a wary Federal Reserve could drive investors to the sidelines
An unwind of buying momentum:
- momentum ... If that falters, it would trigger a larger ... unwind ... a chain reaction could lead to a 5% - 10% pullback
Disappointing, or surging, macroeconomic data:
- a re-emergence of a stagflation or recessionary narrative that threatened hopes of a soft landing would drive equities down
- JPMorgan says the NFPO due today, if its below 75,000, or above 300,000, could spark that narrative change
Take all this with a grain of salt. Place in the 'worst case' basket. Sure, not out of the question. The first seems the likeliest with Q2 earning season approaching in July.
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JPM bear here:
Goldman Sachs bull here:
ps. NFP previews:
