Fade February/March bounce in stocks, JP Morgan says

Investors would be best advised to 'fade' the February/March bounce in equities, despite the weaker headwinds US corporates were now facing in the run-up to the quarterly results seasons and low earnings estimates from analysts, JP Morgan said.

The 'headwinds' stocks - US-listed outfits, specifically - were coming up against from oil, foreign exchange, and purchasing managers' indices had weakened, JP Morgan strategist Mislav Matejka said in a research note sent to clients.

As well, the hurdle posed by analysts estimates was "clearly" subdued, Matejka said, with consensus anticipating the lowest rate of growth in companies' average earnings per share in this cycle, at -6.9%.

However, the outlook for firm's ability to grow the top-line (or sales) "remained subdued" and price-to earnings multiples at year-to-date highs argued against a positive market reaction to companies' results.

Hence, the strategist reiterated his call from three weeks ago for clients to "fade" the recent bounce in stocks.

For him, the 'big picture' was the same as in late 2014, corporate profit margins appeared to be at their cycle peak, which was confirmed by the deceleration evident in the most recent national income and product accounts.

"The rollover in margins is a constraint for equities, as it is likely to pressure capex and labour market down the line."