JPMorgan Says Slowing U.S. Virus Cases to Put Floor Under Stocks
A slowdown in the growth rate of new U.S. coronavirus cases may help put a floor under stocks and dampen volatility, according to JPMorgan Chase & Co.
The Cboe Volatility Index has been tracking data associated with the global spread of cases and has shown a relationship with growth at the U.S. state level, technical strategists Jason Hunter and Alix Tepper Floman wrote in a note Friday. The number of states with growth rates above 20% dropped to under 10 from over 40 in the past two weeks, a trend which could keep pressure on the VIX and moderate any equity declines — if it continues, they said.
“Based on the recent correlation, case growth deceleration in that group can help put further downward pressure on implied equity volatility and blunt the nature of a retest of the March equity price low,” the strategists wrote. “We suspected that markets could anchor to those statistics given the enormous uncertainties associated with a pandemic. So far, that has proved to be the case.”
The JPMorgan duo expect the 2,100s level to hold on the S&P 500, serving as a floor for the market this quarter. They see the 2,750-2,850 area capping rallies over the period. The benchmark gauge closed just below the 2,490 level Friday, having fallen to a low of about 2,192 in March.
28,222 in U.S.Most new cases today
-26% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23
-1.108 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23