JP Morgan sees likely peak in yields, China reopening and poor sentiment supporting stocks

JP Morgan equity strategists sounded a positive note on the outlook for global equities, arguing that "extremely bearish investor sentiment and light positioning" would offer support.

The strategy team led by Mislav Matejka also pointed to improving "seasonals" given the time of year.

Furthermore, they believed that bond yields were "likely" in the process of peaking.

"Inflation remains a lagging indicator of growth, corporate intentions to raise prices have rolled over, as are now peaking intentions to raise wages," they added.

Weaker economic activity should also cap yield levels "from here", they said, which would support equity market multiples if it gained traction.

As well, a potential reopening in China offered a potential positive catalyst.

"China sentiment is at rock bottom and any improvement on this front would be notable."

Their top pick in developed markets remained the UK and in their opinion neither the UK nor Eurozone were "easy shorts" versus the US.

Indeed, the latter had never traded this cheap in comparison to the US.

"Value was our key OW for the last two years, and we stay positive on Value parts of the market, but a peak in yields suggests Growth style could also stabilize from here. Pure Defensives look the most expensive."