JPMorgan Shifts Stance on US Equities to 'Tactically Cautious' Amid Hawkish Fed Remarks
JPMorgan Chase & Co.'s trading team has shifted its stance on US equities to 'tactically cautious' ahead of the Federal Reserve's upcoming policy decision. This change in outlook follows hawkish remarks from Fed Chairman Kevin Warsh, which prompted financial markets to price in an increased probability of interest-rate hikes before the end of the year.
Warsh emphasized that inflation shows little sign of meaningfully cooling during his Jackson Hole speech on Friday. Unlike past central bank leaders, he has offered limited forward guidance regarding the magnitude and duration of potential rate increases. This lack of clarity has contributed to heightened uncertainty about the trajectory of monetary policy.
The CME FedWatch Tool indicated a 65.9% probability of a 25 basis point hike in the September rate-setting meeting, up from 57%. The yield on the benchmark US 10-year Treasury note climbed past 4.75% on Monday, hitting its highest level since January 2025.
JPMorgan's tactical pivot comes as Wall Street enters September, traditionally the weakest calendar month for US stock performance. Beyond monetary policy concerns, the team highlighted several near-term vulnerabilities for equity markets, including a cooling of momentum among high-valuation artificial intelligence stocks and rising energy prices following recent military strikes between the US and Iran.