Stocks Bounce on Manufacturing, Warsh’s Remarks

Jordan Jackson

We forecast a resilient market driven by earnings, though earnings power remains concentrated in AI-related sectors, leading to concentrated positioning.

The composition of the index suggests concentrated earnings will continue to suggest concentrated positioning, with waves of broadening out playing out.

Jordan's title is global market strategist; asks how they think about US vs non-US markets.

Paul

Jordan Jackson

We are cautiously more optimistic on Europe as US-Iran conflict wanes, and see optimism in Japan due to corporate governance and inflation growth. For EM, active selection is needed as it's AI-related, with EM Asia being 80% of the EM universe.

Europe is still on shaky ground but was one of the most hit economies. Global markets may tread with S&P continuing to outperform this year.

The market is overpricing rate hikes; asks what they mean by that.

Paul

Jordan Jackson

Our model tracking Fed speech and historical dissents shows 8-12 of the 12 voting members are in the hold-to-cut camp, including Warsh, so the committee tilts dovish to on hold.

Adjusting policy rates while committees change Fed structure would introduce unwanted volatility in rate markets.

Questions confidence in JPMorgan's market beliefs, suggesting it might be guessing until the next data point.

Amy

Jordan Jackson

We all need to be humble and weigh probabilistic outcomes. If data continues to show a resilient economy and labor market, inflation can continue to come down, giving the Fed breathing room to keep rates on hold.

Broad consensus is we are past peak inflation. Adjusting rates during structural committee changes would add volatility.

Super strong Q1 earnings have been driving the market; asks about Q2 expectations.

Paul

Jordan Jackson

Expect more of the same: markets anticipate ~22% EPS growth, margins moving higher to all-time peaks driven by tech. We look for AI adoption broadening to improve margins for the other 493 stocks, which would confirm productivity gains.

That would provide confidence that AI-driven productivity gains are delivering.

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