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Macro

JPMorgan Traders See Nvidia's $1,000 Surge, Economy Boosting S&P 500

Nvidia's 10% Surge Drives S&P 500 Gains, JPMorgan Predicts Continued Bull Market with 25th Record in Sight

5/23, 14:59 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
JP Morgan Chase & Co.
NVIDIA Corporation
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Key Takeaway

  • JPMorgan traders see Nvidia's strong earnings and economic growth driving the S&P 500 to new highs, with Nvidia shares surpassing $1,000.
  • The S&P 500 is up over 5% in May, fueled by robust corporate earnings and expectations of Fed policy easing.
  • A barbell portfolio strategy is recommended, focusing on AI-related stocks and value/cyclical sectors like banks and automakers.

Nvidia's Earnings Boost Market Sentiment

Nvidia Corp. has once again delivered a stellar earnings report, propelling its shares past the $1,000 milestone and driving the S&P 500 Index higher. The chipmaker's bullish sales forecast underscores the robust demand for artificial intelligence (AI) technologies, which has been a significant driver of market momentum. Nvidia's stock surged approximately 10% following the earnings announcement, contributing to about one-fourth of the S&P 500's gains this year. This performance has been pivotal in the index's more than 5% advance in May, as strong corporate earnings and expectations of Federal Reserve policy easing by year-end continue to buoy investor sentiment.

JPMorgan's Bullish Outlook

JPMorgan Chase & Co.'s trading desk, led by Head of US Market Intelligence Andrew Tyler, remains optimistic about the market's trajectory. "With the AI-theme still delivering and the macro hypothesis intact, we are likely to continue to make new all-time highs," Tyler wrote in a note to clients. He highlighted a combination of at or above-trend gross domestic product (GDP) growth, positive earnings, and a Federal Reserve on pause as key factors supporting a bull market. The S&P 500 is on track for its 25th record this year, driven by these favorable conditions.

Tyler recommends a barbell portfolio strategy that includes the "Magnificent Seven" stocks and semiconductor companies, alongside value and cyclical sectors such as banks, credit cards, automakers, suppliers, and homebuilders. This diversified approach aims to capture gains from both high-growth tech stocks and more traditional, economically sensitive sectors.

Diverging Views Within JPMorgan

Despite the upbeat outlook from Tyler's team, there is a notable divergence within JPMorgan. The bank's chief market strategist, Marko Kolanovic, recently expressed a more cautious stance, citing risks such as high valuations, persistent inflation, and geopolitical uncertainties. Kolanovic's bearish view contrasts sharply with Tyler's bullish perspective, highlighting the internal debate over the market's future direction.

This disconnect is not unprecedented but has been more pronounced since last year. Tyler's accurate calls for all-time highs have clashed with Kolanovic's predictions of a market downturn, which have yet to materialize. This internal debate reflects the broader uncertainty and differing opinions among market participants regarding the sustainability of the current rally.

Street Views

  • Andrew Tyler, JPMorgan Chase & Co. (Bullish on the S&P 500 and AI sector):

    "With the AI-theme still delivering and the macro hypothesis intact, we are likely to continue to make new all-time highs."

  • Marko Kolanovic, JPMorgan Chase & Co. (Bearish on stocks in general):

    "I do not currently see stocks as an attractive investment given a litany of risks, including lofty valuations, sticky inflation and geopolitical uncertainty."