JP Morgan sees new push into banks and cyclicals ahead

Strategists at JP Morgan urged clients to 'keep the faith' on the reflation trade, pointing to the performance of equities at similar points over past cycles.

Yes, activity momentum might be in the process of peaking, Mislav Matejka conceded, but "that was not enough" he said.

In the past, on 100% of those ocasions when the composite purchasing managers' index was above 56.0 points - as was now the case - the S&P 500 had gone on to gain almost 10% on a non-annualised basis.

Euro area activity was also on the up, with consumer prices having reached the European Central Bank's 2.0% target and corporate pricing power on the mend.

Hence, yields on bonds should "recouple" with the "robust" dataflow, Matejka argued, which would see a renewed push into Banks and Cyclicals.

Stocks in the Eurozone looked very interesting given the clear upturn in earnings and the time might also be near to move into Emerging Markets - despite having underperformed since last October - as rate hikes from the Federal Reserve were incerasingly priced-in, the JP Morgan strategist said.