- Global equities are unlikely to fall much further after the recent sell-off, said a JPMorgan Asset Management strategist.
- Karen Ward said central banks are likely to soften their hard talk about inflation as growth slows, supporting markets.
- And she said governments have lost their fear of debt and are not afraid to inject stimulus into shrinking economies.
Global equities are unlikely to fall much further after the brutal sell-off during the first five months of the year, according to a senior strategist at JPMorgan Asset Management.
Karen Ward, the chief European market strategist at JPMAM, told a conference in London on Wednesday that the recent slowdown means central banks need to cut back on their hard talk about inflation.
She also said governments are likely to inject stimulus, and said both measures should support stocks in the second half of the year.
“The markets have come a long way,” Ward said. “We’ve seen the S&P 500’s worst performance at the start of the year in several decades. It’s down about 15% now, it’s slightly less in Europe.”
“We’re not worried about a significant further disadvantage,” Ward said.
JPMAM’s strategist said the key question for investors was whether the current sell-off would turn into a protracted decline with shares falling between 30% and 50%.
She said such a decline is unlikely, in part because markets are likely to be boosted by a softening of the tone of central banks, who have been keen to emphasize they will be tough on inflation.
“They’re talking about the conversation right now. They have to. Inflation is high,” she said. “But as the economy slows, we think we’ll hear a more soothing tone from central banks. So policy will start to help in the second half of the year.”
She also said governments have lost their fear of debt during the coronavirus crisis and will not be afraid to support economies if they slow down.
In the UK and Europe, governments have curbed more economic support as inflation roared, even risking further fueling price increases. In the US, the Biden administration is considering cutting Trump-era tariffs on China in a bid to lower prices.
Ward added that so far there has been little sign of the kind of excessive investment in the economy that can hurt companies and lead to deep recessions when growth slows.
Read more: Goldman Sachs star economist explains whether the US is heading for a recession and reveals what could lead to a rebound in the floundering stock market after the crash