• Investors fear impending recession
• JPMorgan remains optimistic
• Three stocks with great upside potential
The Ukraine war, along with strong demand and global supply chain issues in the wake of the coronavirus crisis, have pushed US inflation to its highest level in over 40 years. As a result, the US Federal Reserve initiated an interest rate turnaround in the spring and has now raised its key interest rate three times. For monetary authorities, this tightening is the monetary policy This is a balancing act, however, because while higher interest rates help curb inflation, they can also slow down economic growth. As a result, many market participants are now fearing a recession.
The S&P 500, which reflects the broad US stock market, shows how great the uncertainty is. With currently 3,795.73 points (closing date: June 23, 2022), it has lost a significant 21.22 percent to its peak of 4,818.62 points reached on January 5, 2022.
recovery ahead
But Dubravko Lakos, Global Head of Equity Macro Research at the US investment bank JPMorgan, expects the stock market to recover significantly: “Market participants have basically positioned themselves for a recession. However, our basic scenario is that there will be no recession occurs,” the analyst told US broadcaster CNBC. “Based on that assumption, we think the portfolios are misplaced.”
Lakos continues to expect the S&P 500 to climb to 4,900 points by the end of the year. Based on the current price level, that would be a strong plus of 29 percent.
smartsheet
The experts at JPMorgan consider three stocks to be particularly attractive: According to MoneyWise, there is great potential in Smartsheet, a platform provider that enables companies to plan, record, manage, automate and report on work. The cloud-based software platform is offered via a subscription model. In the first fiscal quarter, Smartsheet delivered 44 percent revenue growth. Nevertheless, the share price has lost over 63 percent of its value since the beginning of the year.
JPMorgan analyst Pinjalim Bora recently confirmed his “Overweight” rating on Smartsheet stock. He has lowered the price target from 80 to 58 US dollars, but this is still well above the current price level of 31.62 US dollars (closing price: 06/23/2022)
Microsoft
JPMorgan also gives Microsoft a thumbs up. In the first quarter, the software giant was able to increase its sales by 18 percent compared to the same quarter of the previous year and let shareholders participate in the company’s success with 12.4 billion US dollars (+25 percent) through dividends and share buybacks. Nevertheless, the share suffered from the bad mood on the stock market and has lost more than 26 percent of its value since the turn of the year. Against this background, JPMorgan analyst Mark Murphy reiterated his “buy” rating and raised his target price to $320.00 (close on 06/17/2022: $258.86).
Eli Lilly
According to “MoneyWise”, JPMorgan also sees great potential for Eli Lilly. The pharmaceutical giant recorded a 15 percent increase in sales in the first quarter. Shareholders were also happy, receiving a total of $900 million in dividends and another $1.5 billion in share buybacks.
At $312.67 (close on June 23, 2022), Eli Lilly stock is up over 13 percent year-to-date. JPMorgan analyst Chris Schott expects this positive trend to continue and therefore reiterated his “overweight” rating. He raised the price target from the original $340 to $355.
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