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Here's why peak inflation might not signal the end of the bear market in stocks

·4 min read

Howdy markets people. Phil Rosen here in Los Angeles. Officially, I'm a senior reporter, but I'm tempted to change my title to "Bear Whisperer" because that's really what I spend much of my time doing lately.

I've been reading bleak market forecasts and talking to pessimistic analysts at a higher clip than usual, and I've really honed an eye for bears.

Today I'm breaking down what two top banks expect to happen on the Street in the coming months — one of which doesn't see the bear market ending soon.

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Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)

Traders work on the floor of the New York Stock Exchange (NYSE)Spencer Platt/Getty Images

1. It's too premature to call the end to the stock downturn, according to Morgan Stanley. Inflation may have peaked, but that doesn't mean equities are going to see any relief, analysts wrote in a Monday note.

Companies are faced with the two-pronged challenge of falling prices and high labor costs, which weighs on profits and sets a trap for investors.

"The rally in stocks has been powerful, and has many investors believing the bear market is over," Morgan Stanley analysts said.

But that doesn't mean it's time to signal all-clear.

Declining prices are going to drag on corporate profits in the opposite way rising inflation boosted them, the strategists added, and markets are underestimating the impact of an inflation reversal.

July's hot jobs report means companies are still doling out big money on their work forces, and as customers begin to fall, those operating charges will feel heavier.

And yet, the very same economy is giving JPMorgan a more bullish forecast.

Stocks are set to roar higher into the end of the year as earnings revisions reset lower, JPMorgan strategists said Monday.

More reasonable valuations, depressed investor sentiment, and peak Fed hawkishness all lead the firm toward its optimistic view.

Beyond that, JPMorgan shared 10 reasons why the current stock rally isn't just a bear rally — but one that will carry investors into 2023.

In other news:

putin russia
putin russia

Russian President Vladimir Putin attends Orthodox Easter mass in Moscow, Russia, on April 24, 2022.Contributor/Getty Images

2. US stock futures edge higher early Tuesday. Meanwhile, Tornado's crypto token fell 24% after the US Treasury Department imposed sanctions on the cryptocurrency mixer. Here are the latest market moves.

3. On the docket: Emerson Electric Co., Sysco Corp., and Alcon AG, all reporting.

4. Goldman Sachs recommends this batch of highly profitable stocks that are poised to out-earn their peers. While investors grapple with their fears of a recession and a tight labor market, the bank said to focus on these 15 companies even as profit projections fall.

5. The oil market is set to tighten rapidly as winter approaches. An energy expert explained how crude prices remain on track to surpass $120 a barrel once again as supply constraints continue to choke energy markets. Here's what you want to know.

6. Meme stocks are surging once again. Both GameStop and AMC have climbed recently, echoing their meteoric jumps during the original meme-stock craze. The resurgence suggests retail investors are back in risk-on mode . 

7. Russian crude is quietly flowing to Europe as buyers like Italy and Spain snap up barrels. According to data tracked by Bloomberg, Russian crude flows to Italy hit a seven-week high leading up to August 5, and flows spiked to Spain and Turkey as well. Climbing crude volumes to Europe come as the EU's new oil sanctions loom for 2023.

8. The chief investment strategist of a $1.4 billion firm explained why he's rotating back into growth stocks. "The market bottom is in," David Waddell said. He shared four high-quality tech stocks that investors should bet on right now.

9. As new home supply piles up and sale prices fall, weary buyers are getting much-needed relief. Customers are starting to benefit as more opportunities arise to jump back into the market and score a deal. Insider spoke to real estate veteran Rick Sharga to get the lay of the land.

Bed Bath & Beyond stock price
Bed Bath & Beyond stock price

Bed Bath & Beyond stock priceMarkets Insider

10. Bed Bath & Beyond skyrocketed 50% on Monday. It joined fellow meme-stock favorites GameStop and AMC in their recent rallies. The company was the most mentioned name on Reddit's Wall Street Bets.

Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.

Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn). 

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London. 

Read the original article on Business Insider