The latest market observations from JPM's head of cash equity trading, Ron Adler
The market is coming off a banner year, which makes the setup in 2024 tricky. After sentiment grew far too negative in September through November (coupled with a seemingly relentless tax-loss trade), the Fed pivot in December helped broaden out a market that was singularly driven by megacap tech for most of the year.
While the forces that drove the market in Q4 remain, much of the move to start the year was a reversal of those violent late-year moves. Still, it seems to be little more than healthy consolidation, while ASML, SMCI & TSM reminded investors that AI remains a driving force for both tech and the broader market, with the recent move lending credence to the adage if you’re not long, you’re short (which has also highlighted the challenges with crowded funding shorts and underweights, e.g., IBM). The themes of monetary easing and disinflation remain very much intact. The Fed has been fighting this construct for months, and while they rhetorically speak out of both sides of their mouth, if they want the fiscal easing process to be gradual and closer to neutral, they’ll need to start sooner rather than later. The debate about yields and disinflation are important, but the focus for 2024 should really be around growth. In a world of slowing growth, it’s that scarcity of growth that will continue to bolster megacap tech (the group also benefits from the market’s current aversion to China exposure).
