Navigating the Shifting Tides: Decoding the Market's Next Move

As the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) reach new heights, investors are closely watching the market's trajectory. In a candid discussion, JPMorgan asset management global market strategist Jordan Jackson shares his insights on the potential shifts in the tech sector and the broader market landscape.

Unlocking the Secrets of Earnings Season

Benign Outlook and Pricing Power

According to Jackson, CEOs and CFOs are likely to maintain a "benign outlook" during the upcoming earnings season. He suggests that while the economic conditions may not be exceptional, they are not dire either. This backdrop allows companies to exercise a degree of pricing power, which could contribute to the continued earnings recovery in sectors outside of technology. Jackson believes this diversification is crucial for the sustainability of the market rally.

Margin Scrutiny and Input Cost Management

As the market navigates the earnings season, Jackson emphasizes the importance of monitoring price pressures and their impact on margins. With nominal GDP growth expected to moderate in 2025, companies will need to carefully manage their input costs and wage pressures. While input costs and wage pressures appear to be easing, Jackson notes that there may still be some uncertainty on the input cost front. He also anticipates a gradual decline in the US dollar over the course of 2025, which could provide a boost to international earnings.

Sector Opportunities and Valuations

While the dominance of mega-cap tech companies continues to drive valuations at the index level, Jackson sees pockets of value in other sectors of the economy. He highlights healthcare, utilities, industrials, and materials as sectors that have lagged the broader market's performance and could potentially catch up. These sectors, he suggests, may offer more attractive valuations relative to the S&P 500 as a whole.

Navigating Macro Uncertainties

As the market navigates the upcoming presidential election and the Federal Reserve's next moves, Jackson emphasizes the importance of staying vigilant. He acknowledges the macro-level uncertainties that could impact the market's trajectory, but remains cautiously optimistic about the broader market's resilience.

Diversification and Selective Positioning

Jackson's insights suggest that a diversified approach may be prudent in the current market environment. While the tech sector has dominated in recent years, he believes that a more balanced portfolio, with exposure to sectors like healthcare, utilities, industrials, and materials, could offer opportunities for investors. By selectively positioning their investments, investors may be able to navigate the shifting tides and capitalize on the market's potential.