The recent equity rally could stall after the Federal Reserve’s expected rate cut as investors move to take profits, according to strategists at JPMorgan Chase & Co.
Markets are pricing a 92% chance that the US central bank will lower borrowing costs on Wednesday. Bets have been steadily rising on the back of positive comments from policymakers over the past few weeks, helping to boost stocks.
“Investors might be tempted to lock in the gains into year end, rather than be adding directional exposure,” the team led by Mislav Matejka wrote in a note. “The cut is now fully in the price, and equities are back to highs.”
The JPMorgan strategists remain bullish over the medium term, saying that a dovish Fed will be supportive for equities. At the same time, subdued oil prices, decelerating wages and easing US tariff pressure will allow the Fed to ease monetary policy without fueling inflation, Matejka wrote.
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Global stocks have rebounded in recent weeks to approach an all-time high reached in October. Still, uncertainty remains over the Fed’s trajectory for 2026 amid mixed signals on the health of the US labor market.
Other factors that can boost stocks in 2026 include reduced trade uncertainty, improvement in China’s economic outlook, higher fiscal spending in the euro zone and the swift rollout of artificial intelligence in the US, the JPMorgan strategists said.
Matejka had also warned of the US stock rally stalling after the Fed’s September rate cut. The gauge has been volatile since then, before picking up in the past few weeks amid new optimism of a December cut.
Over three-quarters of asset managers polled in an informal Bloomberg survey across Asia, Europe and Wall Street said they were positioning their portfolios for a risk-on environment through 2026.
With assistance from Matthew Burgess.
This article was generated from an automated news agency feed without modifications to text.
