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JPMorgan Portfolio Manager adds S&P 500 exposure. Here’s why he’s bullish


According to Phil Camporal, Portfolio Manager, Global Allocation Strategy, Asset Management Unit, JPMorgan Chase & Co., the U.S. stock market has a bull run.

Campbell, who weighs in on U.S. equities, added exposure to the S&P 500 index this month, he told MarketWatch by phone. He said trade has increased its equity allocation from 65% to 67%, with U.S. stocks the largest position followed by overweight to Europe.

Now in the “mid-cycle” phase of the U.S. market, Campbell says he prefers to split between large-cap stock growth and price factors. He said he was optimistic about the stock market in part because the US wave of Covid-19 cases fueled by the coronavirus Delta variant – which slowed economic growth in the third quarter – was declining and consumer spending seemed strong.

Also, the Federal Reserve’s monetary policy remains gross even though it may begin to reduce its monthly bond purchase assets later this year, Campbell said. The Fed is looking for further progress in maximum employment before tightening its policy by raising interest rates, which should be left at least for the time being, including housing equity investors, he said.

“It’s bullish to take risks in the United States,” Campbell said.

Read: U.S. economy recovered slightly in October after delta speed bump, IHS finds

He said the Fed Funds Future has set a price target of 50 basis points for a rate hike next year, which, in his view, makes it impossible to expect the central bank’s first move to reduce assets to be completed by mid-2022. “Putting pressure on the two claws after that seems a little more aggressive,” Camprell said.

Yields on 10-year Treasury notes have risen in recent weeks and are now trading near a reasonable level, according to Campbell, who invests in stocks, bonds and options under JP Morgan Asset Management’s global allocation strategy.

He believes the Fed is not behind the curve with its monetary policy. “If the Fed is felt behind the curve, I think the yield curve will be much higher,” Camprell said.

Yield of 10 year Treasury Note TMUBMUSD10Y,
1.640%
According to factset data, the transaction was around 1.64% around noon on Friday, compared to around 1.2% in the second half of July when the coronavirus delta variant was on the rise.

Views: Why a big drop in bonds ‘confuses people’ and upsets stocks

The Delta variant “after taking a bite from third-quarter growth,” Camporal said, should get the economy back on track.

Under his base case, he said higher U.S. stock valuations would be verified by “upward trend” economic growth and strong corporate earnings. However, inflation and high energy prices are potentially structuring the risk of this outlook, as it could lead the Fed to a quick recovery from current low interest rates, Camporal said.

S&P 500 Index SPX,
-0.14%
According to FactSet data, Thursday was trading at noon after closing at an all-time high on Thursday. The index has risen about 5% so far this month, rebounding from a 5% loss in September, profits for the year are up more than 20%, according to data on Friday afternoon trading show.



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