It’s not easy to be bullish on stocks these days for one very simple reason: an aggressive Fed.
The US central bank has already announced three 75 basis point rate hikes in a row. Market participants expect another of the same magnitude at this week’s FOMC meeting.
But according to the JPMorgan trading desk, there is a specific scenario that could send the stock soaring.
The bank’s team projects that if the central bank raises interest rates by just 50 basis points and Fed Chairman Jerome Powell expresses a willingness to tolerate inflation and tight labor market conditions, the S&P 500 could rise. more than 10% in one day.
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“It is difficult to conceive of a scenario in which this outcome occurs given current levels of inflation and a tight labor market,” the team writes. “If this outcome were to occur, the immediate reaction could produce a double-digit return in one day for stocks.”
At this time, the bank’s economists are still projecting a 75 basis point increase as are other market participants. But that doesn’t mean there aren’t opportunities for stock market investors. Here’s a look at three stocks that JPMorgan finds particularly attractive, even in these market conditions.
No one spending $1,600 on a fully featured iPhone 14 Pro Max would call it a steal. But consumers love to splurge on Apple products anyway.
Earlier this year, management revealed that the company’s active installed hardware base has exceeded 1.8 billion devices.
While competitors offer cheaper devices, millions of users don’t want to live outside of the Apple ecosystem. The ecosystem acts as an economic moat, allowing the company to make large profits.
It also means that as inflation spikesApple can pass on higher costs to its global consumer base without worrying too much about a drop in sales volume.
After looking at Apple’s earnings report last week, JPMorgan analyst Samik Chatterjee said that “the company’s resistance to a difficult macro across the mix of products and services is likely to prompt a reassessment.” .
The analyst maintains an “overweight” rating on Apple and a $200 price target, about 32% above current levels.
As a leading designer of graphics cards, Nvidia’s stock has been on a solid bull run for the past decade. But that rally came to an abrupt end in November 2021. Since peaking at $346 in late November, the stock has dropped a staggering 60%.
Nvidia’s drop is substantial even when compared to other battered stocks in the semiconductor sector.
Nvidia’s business is still on the right track, which makes it a particularly intriguing counter idea. The chipmaker generated $6.7 billion in revenue in its fiscal second quarter. The amount represented a 3% year-over-year increase.
Data center revenue increased 61% year over year to $3.81 billion.
JPMorgan analyst Harlan Sur recently gave Nvidia an “overweight” rating and a $220 price target. That implies a 61% upside potential.
Many consider big data to be the next big thing. And that’s where Snowflake shines.
The cloud-based data storage company, founded in 2012, serves thousands of clients across a wide range of industries, including a 2021 Forbes Global 2000 510.
Momentum is strong in the Snowflake business. In the three months ending July 31, revenue was up 83% year over year to $497.2 million. In particular, the net income retention rate registered a solid 171%.
The company continued to make huge customer gains. It now has 246 customers with product revenue of more than $1 million in the last 12 months, up from 116 such customers a year ago.
JPMorgan analyst Mark Murphy has an “overweight” rating on Snowflake and a price target of $210, about 30% above where the stock is today.
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