Traders at JPMorgan Chase are putting forward three scenarios for the US stock market linked to developments in the Middle East.
Starting with a “status quo” scenario, JPMorgan’s trading desk says stocks will see some stability in the short term if tensions ease on a limited basis and ships passing through the Strait of Hormuz remain largely restricted. Reports Bloomberg.
“It would be a short-lived victory if Trump backed down on his threats about Iran’s IR, which would appear to prevent Iran from targeting Saudi oil production while preventing the Houthis from closing off access to the Red Sea.”
In a bearish scenario, JPMorgan outlines a scenario in which diplomacy fails coupled with increased military activity, sending the price of WTI between $125 and $150. In such an event, traders at the bank warn that the market is likely to see a “puke everything” sell-off, with airlines being the most vulnerable, and companies in the renewable energy and defense sectors likely to see demand.
“In stocks, you should buy everything related to energy.”
As for the bull case scenario, traders expect “everything goes up” if tensions ease or government policy changes. Traders say small-cap stocks and technology stocks will come out of the gates to lead the market, while homebuilders and retailers will outperform. They also see the financial sector performing well amid an improving macro environment, with precious metals getting a boost from a weaker dollar. Also in a bullish scenario, traders see energy stocks taking a hit.
At the time of writing, the S&P 500 is trading at 6,616, while oil is worth $88.25 per barrel.
Follow us on X, Facebook and cable
Never miss a beat – Subscribe Get email alerts delivered directly to your inbox
browse Hodel’s daily mix
 
Disclaimer: The opinions expressed in The Daily Hodl are not investment advice. Investors should conduct due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please note that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the purchase or sale of any assets including cryptocurrencies, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated image: mid-flight
