- JPMorgan said investors who sell stocks now are taking a risk that they’ll miss the rebound.
- The S&P 500 was lower Monday after the US and allies tightened sanctions against Russia over the war in Ukraine.
- Yet JPMorgan’s analysts said the war should not massively effect the global economy, and that stocks are poised to recover.
Investors should hold onto stocks despite the intensifying Russia-Ukraine conflict because the global economy remains strong, JPMorgan has said.
Analysts at the bank also said investors risk losing out from a rebound if they sell shares now, in a note to clients Monday.
The benchmark S&P 500 stock index opened more than 1% lower Monday before paring its losses somewhat. The declines came after the US and its allies imposed tough new sanctions on the Russian financial system, raising concerns about potential repercussions for the global economy.
However, the index rose sharply last week after Russia invaded Ukraine on Thursday, unleashing what could be the biggest conflict in Europe since World War II.
Goldman’s analysts, led by strategist Mislav Matejka, said the war is unlikely to have a major impact on the world economy and on the fundamental factors that drive equities.
They cautioned that a sharp rise in commodities prices could be one factor that derails growth, although they noted that oil prices have so far risen by less than many expected.
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The strategists said they expect equities to rebound from their recent sharp sell-off, given that economic growth is set to be strong as the Omicron wave of coronavirus fades.
The S&P 500 was down almost 9% for the year as of Monday morning. Investors have sold stocks as they brace for the Federal Reserve to raise interest rates sharply in 2022, and as tensions in eastern Europe intensified.
“If one is selling on the back of the latest geopolitical developments now, the risk is of getting whipsawed,” JPMorgan’s analysts wrote.
“Historically, vast majority of military conflicts, especially if localized, did not tend to hurt investor confidence for too long, and would end up as buying opportunities.”
However, Mike Wilson, chief equity strategist at Morgan Stanley, said the first Fed rate hike — which is expected in March — could put US stocks under more pressure, especially as companies have warned that earnings are likely to slow.
“In a world where valuations remain elevated, and earnings risk is rising, last week’s tactical rally in equities will likely run out of momentum in March as the Fed begins to tighten in earnest and the earnings picture deteriorates,” Wilson wrote in a note to clients Monday.
Insider’s live blog of the invasion is covering developments as they happen.