Facing Market Adjustment, Goldman Sachs and JPMorgan Chase Exercise Caution

In recent times, the U.S. stock market has experienced significant fluctuations, witnessing the largest decline since September 2022 and the strongest rebound since November 2022. Investors are closely watching whether the "adjustment" in U.S. stocks is over and if the market has hit bottom.

Both JPMorgan Chase and Goldman Sachs are adopting a cautious stance.

JPMorgan Chase: Kolanovic's Redemption?

Marko Kolanovic, a former chief strategist at JPMorgan Chase with a Ph.D. in high-energy theoretical physics, had been warning for months before his departure about the eventual disorderly outcome of overly crowded momentum trades. The market turmoil of the past week might have given him some reason to feel vindicated.

Another view from JPMorgan Chase's trading department also appears cautious, listing arguments for and against the market having hit bottom.

Supporting reasons include:

The recent volatility may just be technical selling, as fundamental data does not justify such significant fluctuations.

Both macro and micro fundamentals remain solid, with optimistic GDP growth expectations and corporate earnings outperforming expectations.

The pullback is a normal phenomenon, consistent with historical patterns.

The main arguments against include:

The Federal Reserve may delay rate cuts, triggering a negative reaction in the bond market.

CTAs have more room to sell.

Negative seasonal factors and heightened geopolitical risks.

Regarding whether the market has hit bottom, JPMorgan Chase's trading department stated in the report that the market trend might slightly increase from now on, "but the market still needs to see evidence that the economy remains in a growth mode."

Goldman Sachs: Cautious but Optimistic, Believing the Market Has Bottomed Out in the Short Term

At Goldman Sachs, although the company also maintains a cautious stance, its view is somewhat optimistic, believing the market has bottomed out in the short term:

From here, the trend will be volatile but upward.

The S&P 500 index closed at an all-time high on July 16, just shy of 5700 points...The VIX volatility index hit 65 on Monday...This has only happened twice before...During the financial crisis in November 2008 and the COVID-19 pandemic in March 2020...The turbulence we are experiencing will not disappear immediately, but we do not believe anything terrible is brewing.

Over time, buying a 5% pullback in the S&P 500 has proven to be a very wise strategy.

Notably, unlike the high consumer price index (CPI) of the past two years, which led to market crashes, the market now hopes that next week's inflation report will be slightly higher to avoid a deflationary spiral.

Overall, despite the market rebound, major institutions remain cautious. Investors should closely monitor future economic data and policy developments to determine if the market has truly hit bottom.