The rally we've seen this year has been entirely driven by earnings, says JPMorgan's Stephen Parker
Speakers
Stephen Parker
— Head of Advisory Solutions, J.P. Morgan Private Bank
Summary
Stephen Parker of JPMorgan Private Bank argues the market rally is entirely earnings-driven, setting a base S&P 500 target of 7800 and a bull case of 8900 if broadening continues. He highlights emerging markets and Asia as top calls driven by chip demand, and sees opportunity in lagging financials where loan demand remains robust. Key risks include overheating sentiment, energy prices, and consumer fading, while the Fed is expected to stay on hold.
- S&P 500 rally is entirely earnings driven, not multiples.
- Base target 7800, bull case 8900 with flat multiples.
- Broadening to 8 of 11 sectors with double-digit earnings growth needed for upside.
- Emerging markets, Korea, Taiwan are top calls; EM earnings expected up 50%.
- Financials have lagged but robust loan demand creates opportunity, especially in banks.
- Fed on hold; markets can absorb a couple of rate hikes.
- Risks: animal spirits, energy price spikes, consumer fading, labor weakness.
Ideas
Earnings-driven rally targets 7800-8900 S&P.
The rally has been entirely earnings driven and earnings momentum will continue. Base case S&P 500 target is 7800, with a bull case of 8900 achievable if multiples simply hold steady alongside that earnings growth.
EM earnings growth 50% driven by chips.
Emerging markets, particularly Asia, Korea and Taiwan, are a top call this year. The semiconductor chip story is a huge part of it. EM markets are up 30% but EM earnings growth is expected to be up 50%, driven by healthy demand despite some bottlenecks.
Financials laggard presents robust loan demand opportunity.
Financials have been a laggard this year despite improving earnings growth and robust loan demand. Concerns around private credit, energy prices, and AI disruption have weighed, but the underlying loan demand driver remains strong, creating an opportunity, especially in banks.
