In an interview with CNBC, a J.P. Morgan representative warned that Asian equity markets could deliver only modest returns for the rest of the year. Mixo Das, Asia equity strategist at J.P. Morgan, said, “I think most of the gains for this year in Chinese as well as Asian equity markets are already behind us. From here, it’s going to be more of a difficult slog. We still see gains but it’s going to be a much more volatile process.”
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Earlier this year, Goldman Sachs (GS) echoed similar views about US equity markets. However, US equity markets have been trending upwards although the pace of the increase hasn’t been as sharp as we saw at the beginning of the year.
What’s been driving the markets?
Optimism over US-China trade talks, the Fed’s dovish stance on 2019 rate hikes, and signs of a bottom in the Chinese economy have helped propel global markets higher this year. Plus, US markets were clearly oversold in the fourth quarter amid expectations of a sharp slowdown in 2019 economic growth. However, the economy wasn’t as terrible as some observers were forecasting.
The SPDR S&P 500 ETF (SPY) is up 16.5% for the year, based on yesterday’s closing prices. The FAANG pack has also moved higher, recouping its fourth-quarter losses. NVIDIA (NVDA) and Advanced Micro Devices (AMD) have gained 38.5% and 48.0%, respectively, year-to-date.
While J.P. Morgan expects Chinese markets to remain sluggish in 2019, some observers expect the market rally to continue.