The stock market has more room to the upside as a staggered global economic recovery unfolds, JPMorgan said in a note on Thursday.
China led the post-pandemic economic recovery last year, and now the US is beginning to see mounting evidence of a strong economic rebound. Europe will likely see an economic rebound materialize later this year as COVID-19 cases subside, according to JPMorgan.
But the staggered economic recovery is actually “a blessing in disguise” for the stock market, as a synchronized global recovery would have likely meant an overshoot in US treasury yields, which would have weighed on the valuations of risky assets like stocks, the bank said.
Now, three factors serve as a solid backdrop for the market to continue rising to new record highs, aside from the staggered nature of the current economic rebound. Those factors are above-trend global GDP growth, continued fiscal and monetary policy support from governments and central banks around the world, and progress in the vaccination and reopening of economies, said JPMorgan.
“While there is a lot of talk about asset bubbles, it is hard to see one in the broad equity market, but certain segments that have more than tripled in price over a short period of time are likely experiencing bubbles,” JPMorgan said.