Morgan Stanley Details Three Sectors for ‘Next Leg of Bull Market’ As JPMorgan Raises Odds of Imminent Fed Rate Cut

Banking titan JPMorgan Chase remains unfazed by signs of labor market softness, saying the US economy continues to move steadily ahead.

In late July, the Bureau of Labor Statistics (BLS) slashed its job growth estimates, revising June’s figure from 147,000 to 14,000 and July’s from 144,000 to 19,000 – a combined two-month drop of 258,000 jobs.

In a new CNBC Television interview, David Kelly, chief global strategist at JPMorgan Asset Management, thinks that the jobs report is clouding what is otherwise a picture of a healthy economy.

“The jobs numbers is just one report… It may be overstates the weakness in the economy. If you look at light vehicle sales in July, 16.4 million units. There’s nothing wrong with that.  It looks like domestic airline travel is stabilizing. So what we’ve got here is we’ve got a tortoise of an economy. It’s a relatively healthy tortoise; it’s moving forward.

We’re going to have somewhat higher inflation. So it looks to me like the economy is doing okay, and the big thing that has changed in the last few days is that the probability of the Fed cutting in September has gone up. 

So it looks like we may get our interest rate cut cake and still be able to eat a fairly healthy economic backdrop.”

Meanwhile, Morgan Stanley believes the equity bull market is intact despite a pullback earlier this month.

In an interview, Morgan Stanley private wealth advisor Sherry Paul believes that the stock market has more upside potential as countries focus more on domestic production and self-reliance. She also sees growth in the health and biotech sectors, while noting that certain industries will benefit from looser government regulations.

“I think the next leg of this bull market is going to come from a broadening out just beyond the AI (artificial intelligence) story into three other thematics that are emerging and those are going to center on AI, deglobalization, longevity and deregulation.

What’s unique about this setup is all four of those are interacting and communicating, and accelerating in the same time zone. So we should see an opportunity for investors that have missed this first leg that’s been AI-driven come into the market. There’s still room to grow.”

 

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