This is when you sell cyclical winners and buy technology stocks, says JPMorgan

US stocks are expected to open higher after DJIA Dow Jones Industrial Average,
+ 0.90%
and S&P 500 SPX,
+ 0.10%
closed to records last week.

Comes as a yield to the US Treasury for 10 years TMUBMUSD10Y,
1.622%
remained constant at 1.619%. However, attention will quickly turn to Wednesday’s Federal Reserve meeting, which has become key in the context of rising bond yields in recent weeks. The central bank is under pressure to prevent a further destabilizing increase in yields.

In ours call of the dayJPMorgan strategists said the rise in bond yields is not over yet and that it is premature to start selling cyclical stocks and buying defensive stocks, such as health and technology stocks.

The investment bank’s strategies, led by Mislav Matejka, said that valuations of cyclical stocks – those that will gain as economic activity grows – began to look “toppy” after the strong race of the last year.

European cyclicals, for example, have outpaced defensive stocks by 57% in the last 11 months – nearing the top when it comes to previous recoveries. As a result, they said that most cyclical / defensive movements could be “behind us”, given the size of the cycles and their widespread values.

But strategists have warned that it is still “premature” to position itself for a reversal. “For this, we need to see the top PMIs, the weakening of relative earnings and the cessation of rising bond yields,” they said.

These three crucial things are unlikely to happen again, they said, with the momentum gains for cyclicals set to “continue to accelerate in the next few quarters.” In terms of purchasing managers’ indices, the out-of-sync nature of the global cycle – with China potentially peaking, the US approaching highs and Europe seeking to rise during the summer – means a peak is not imminent, they said.

The key factor for cyclicals remains the direction of bond yields and, importantly, JPMorgan strategies said yield improvement has not yet been completed. “Yes, in the short term, decision makers will continue to push back, but [they] they will accept higher returns as the economy consolidates. ”

“As long as yields increase, cyclicals should not be sold,” they added.

On the other hand, value stocks continue to look very attractive, JPMorgan said, as it has focused its long positions on banks and relaunching trade.

Chart

Deutsche Bank DB,
+ 1.44%
strategies improved their projected S&P 500 earnings per share (EPS) for $ 2021 to $ 202 and $ 2022 to $ 222, following the $ 1.9 trillion stimulus package and economic forecast updates.

Source: Bloomberg Finance LP, Haver, Deutsche Bank Asset Allocation

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The value of short bets against the shares of special purpose procurement companies (SPACs) has tripled since the beginning of the year, according to data from S3 Partners published by the Wall Street Journal.

markets

US YM00 futures,
+ 0.21%

ES00,
-0.06%

NQ00,
-0.13%
shown slightly higher in front of the opening. European equities gained more significantly with the pan-European Stoxx 600 index up 0.6% at the beginning of trading. Asian markets were mixed overnight as investors watched the Fed meet.

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Bitcoin BTCUSD,
-7.27%
prices hit a record high on Saturday, rising above the $ 60,000 stage. The cryptocurrency has since fallen and last traded at $ 56,272, according to CoinDesk.

Elon Musk has officially changed his title to “Technoking”, according to a Tesla TSLA,
-0.84%
deposit disclosed Monday.

Mexican President Andrés Manuel López Obrador on Sunday criticized the US government, saying the US had not helped Mexico with COVID-19 vaccines.

Danone BN,
+ 3.99%
President and CEO Emmanuel Faber will resign, the French food group committee confirmed on Monday. It comes amid pressure from activist investors in recent months.

Swiss pharmaceutical company Roche Holding ROG,
+ 0.90%
said Monday that it had agreed to acquire GenMark Diagnostics GNMK,
+ 0.19%
in a transaction valued at about $ 1.8 billion.

Digital payment company Stripe said on Sunday that it had closed a $ 600 million round of financing, valued at $ 95 billion – more than double its valuation a year ago.

Beyoncé and Taylor Swift made history at the Grammy, where the top awards were won by musicians.

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