Market Outlook – MetalMiner Technical Analysts Criticize JPMorgan

Welcome! We want to introduce you to the MetalMiner Gen-Z team that works behind the scenes performing TA (technical analysis) and trading on behalf of MetalMiner (yes, we have set up our own in-house trading desk to trade our own forecasts of metal prices). We continue to be amazed by these kids! They can code, innovate, generate fabulous ideas and constantly push us to “up” our game! All of this contributes to the market outlook. So we couldn’t resist giving them the chance to critique a recent contrarian mid-year market analysis released by JP Morgan. – ed. Remark

According to Marko Kolanovic, JP Morgan’s Chief Market Strategist and Co-Head of Global Research:

If there is no recession – which we believe – then the prices of risky assets are too cheap. Many segments of the stock market are down 60-80%. Investor positioning and sentiment are at multi-decade lows. So, it’s not that we think the world and economies are in great shape, just that an average investor expects economic catastrophe. If this does not materialize, risky asset classes could recoup most of their first-half losses. Our bullish, off-consensus view is therefore a lost-year forecast – a resumption of first-half losses in risky assets.

We presented this analysis to the team and asked each member to comment on where they agreed, what they thought of JP Morgan’s market outlook, and where they thought JPMorgan went wrong. Here’s what the team had to say:

Here are the points on which MetalMiner analysts agreed with JPMorgan’s position and market outlook:

Daniel Jules:

  • I agree with JP Morgan’s projection that the Fed will raise the fed funds rate less than most people expect. Many retail and institutional investors are anticipating extremely aggressive rate hikes, and Federal Reserve Chairman Powell has also signaled substantial increases alongside quantitative tightening measures. I believe that such aggressive rate hikes will not materialize because as stocks fall and unemployment rises, the Fed will face significant pressure from the executive branch, Congress and the general public to stop raising rates and support the economy instead. People prefer price instability to a depressed economy, forcing the Fed to halt or scale back rate hikes and quantitative tightening.

Jimmy Chiguil:

  • “Investor positioning and sentiment are at multi-decade lows. So it’s not that we think the world and economies are in great shape, just that an average investor is expecting disaster. If this does not materialize, risky asset classes could recoup most of their first-half losses. I agree because I believe that if we don’t drop the proverbial “second shoe” and get back up and running like we did during COVID, risky assets will skyrocket again. This will leave behind those who did not wait for a conservative approach to enter the market. Retail investors are indeed participating in an all-time low this year, as market sentiment for next year looks bearish, along with everyone’s expectations for a continued market correction.

Atticus Bartoli:

  • “One thing I agree with is the recent actions of the Federal Reserve and the big rate hike. Their prediction for the top is around 3.5% by Q1 2023, but I’m aiming a bit higher because we’ve already hit that point. We broke down recently – most likely in anticipation of the next CPI data release. From what I understand, the next CPI data should be lower than the previous one. If so, we may see some relief in the high-risk asset markets. From a global perspective, if inflation does not come down sharply and can continue to rise, I see 3.7% and 4.5% as possible points to hit next.

Isaac Busch:

  • “Commodities are on track to deliver a third consecutive year of significant positive returns, up 30% year-to-date. Despite this strong performance, the case for commodities remains strong. explained by the fact that acute shortage conditions continue to persist for all commodities. Summer is the traditional peak demand season, but current inventories are 19% below historical norms. time, the absence of a buffer stock makes the market vulnerable to unforeseen supply disruptions.” Due to supply chain issues (mainly energy costs), commodity prices may slowly start to decline. Yes, most commodities have done well this year, but if supply chain issues persist with low unemployment and interest rates not effectively controlled, we may see a significant drop .

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The technical support team also had strong disagreements with JPMorgan’s analysis. Here are some of those reasons:

Daniel Jules:

  • I disagree with JP Morgan’s assessment that emerging markets are in an acceptable state. Emerging markets today face significant and weakening headwinds. I believe that economic shocks (such as price instability and energy disruptions) hit emerging markets harder than developed markets, which can experience more turbulence. Also, the main measure the article uses to claim that emerging markets are in an acceptable state – savings rates – strikes me as rather arbitrary. After all, there are so many measures to judge the health of an economy. The savings rate is only a fraction of the overall macroeconomic picture.

Jimmy Chiguil/Isaac Busch:

  • “In our view, almost the entire complex remains a buy,” said Natasha Kaneva, head of the Global Commodities Strategy team at JP Morgan. I disagree with this because it sounds a bit like “this is the bottom for commodities”. My beliefs are contrary to that. I just don’t believe the case for commodities is strong through 2023. – Jimmy
  • If I disagree with that, it’s because of rising interest rates. If rates continue to rise, market fears will only continue. The supply chain remains in poor shape as electricity prices continue to rise. For me, commodities can go down further. -Isaac

Atticus Bartoli:

  • One thing I disagree with is the rapid asset recovery predicted by Mark Kolanovic in the lead quote. I don’t think it will be a quick process. In fact, I think we will be dragged into a longer period of market pressure due to record inflation levels. The article points out that “the case for commodities remains strong, as acute scarcity conditions continue to persist for all commodities.” This, in general, is very bearish for the economy. After all, something should be done to counter the rise in commodities. Currently, commodities have corrected somewhat from their highs. Still, if shortages hit the market as expected and fresh highs are made for commodities, it will be difficult for high-risk assets to stay bullish. I think we are going to be in a battle of buyers and sellers for some time, with asset prices trading sideways.

What do you think? Leave a comment and let us know!

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