JPMorgan After Powell: “Buy Every Dip”

One week ago JPMorgan’s chief equity strategist, Dubravko Lakos-Bujas, joined the bearish sellside bandwagon aka the “Doom Chorus” we profiled previously and which included such bank as Morgan Stanley, Goldman and Deutsche Bank, when writing that after “aggressively pushing the upside case for equities” for the last 12 months, and arguing for a continued melt-up  with S&P 500 reaching 4,000 in 1Q and the majority of the upside to our year-end PT of 4,400 being realized during 1H”, he warned that “easy equity gains for the broad market are likely behind us” and as a result JPMorgan’s “bullish conviction is now lower.”

Remarkably, Lakos-Bujas’ bearish reversal followed just hours after his fellow JPM Croat and permabull, Marko Kolanovic, appeared on CNBC and said that “It’s time to buy the dip” (it wasn’t clear just what dip he was referring to).

JPMorgan’s Marko Kolanovic on how President Biden’s reported proposal to raise the capital gains tax could affect the markets pic.twitter.com/nXrRzDhGly

— CNBC’s Fast Money (@CNBCFastMoney) April 22, 2021

So fast forward to today when after this afternoon’s extremely dovish FOMC statement in which there were no changes to policy, and Powell presser in which the Fed Chair pushed back on questions about rampant reflation (stagflation) as purely “transitory” despite casually mentioning that capital markets seem “frothy”…

“Some of the asset prices are high. You are seeing things in the capital markets that are a bit frothy. That’s a fact,” Fed Chair Powell says in response to a question from @bcheungz. “The overall financial stability picture is mixed, but on balance it’s manageable.” pic.twitter.com/6ZbiFDIQmW

— Yahoo Finance (@YahooFinance) April 28, 2021

… when JPMorgan flip-flopped again, and in the afternoon market intelligence note by JPM’s Andrew Tyler, the strategist not only streamrolled over Lakos-Bujas’ words of caution, but reverted JPM right back to its rightful place as Wall Street’s most bullish bank, telling clients to “buy every dip”:

Beginning with Powell, there was chatter that we may hear language that the Fed was beginning to think about tapering. That did not come to fruition and bonds caught a big on the back of that. Equities subsequently sold off. The lack of action and the lack of a statement should have been consensus as we look towards June to hear language on tapering. That said, Powell remains adamant that nothing will change until there is substantial improvement in labor markets and the broader economy. With the US still in an 8mm+ job deficit, how does he/Fed define “substantial improvement”? Is that recovering 50% of those jobs? 75% 90? This is really the question and given his lack of traditional economic training, past models may give investors little comfort.

My take is that the Fed’s announcement today is market-positive. We will still receive $120bn/month in QE with historically low rates. US earnings continue to improve and we are still several weeks away from a full reopening.

Buy every dip.

Which reminds us of what we said just last Friday when we reported that JPM had turned bearish:

Which probably means no more bullish hits for Kolanovic on CNBC for at least a few weeks, when the S&P will either break out above 4,400 forcing JPM to once again turn ravingly bullish, or stocks indeed fall. Which, however, we find unlikely for one simple reason: as we said first thing this morning when we read JPM’s report, “JPM has joined the bearish bandwagon, there is no big bank that is bullish on stocks in the mid-term.” The implication is simple: stocks will go up…

It wasn’t “a few weeks” – instead it was just a few days, but sure enough stocks did touch a fresh record high… and as expected JPM is balls to the wall bullish once again.