JP Morgan says a big miss, or beat, on the US jobs report (NFP) could flip the narrative

This one’s a little out of left field. Via a note from JP Morgan training desk that warns of the risk of 10% drop in the benchmark US equity index over the summer months in the US:

• could test 5,00
• potentially fall to around 4,800.

The three catalysts:

Buyers become exhausted

• “The combination of earnings season stock performance and narrowing market breadth points to a market that needs a new set of catalysts and/or reassurance about the prevailing market narrative,”
• in-line macro data, along with a wary Federal Reserve could drive investors to the sidelines

An unwind of buying momentum:

• momentum … If that falters, it would trigger a larger … unwind … a chain reaction could lead to a 5% – 10% pullback

Disappointing, or surging, macroeconomic data:

• a re-emergence of a stagflation or recessionary narrative that threatened hopes of a soft landing would drive equities down
• JPMorgan says the NFPO due today, if its below 75,000, or above 300,000, could spark that narrative change

Take all this with a grain of salt. Place in the ‘worst case’ basket. Sure, not out of the question. The first seems the likeliest with Q2 earning season approaching in July.

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JPM bear here:

• JPMorgan’s Kolanovic says the resurgence in meme-stocks is a bad sign for stock market

Goldman Sachs bull here:

• Goldman Sachs sees a “wall of money” pouring into the US equity market in Q3

ps. NFP previews:

• Deutsche Bank’s Back To The Future NFP preview, longest low unemployment run since 1950s
• US jobs numbers due Friday – Non-farm payrolls preview

This article was written by Eamonn Sheridan at www.forexlive.com.