JPMorgan Chase Warns Stock Market Recovery May Fade As Bank of America Recommends ‘Cleanest Investment Play’ To Clients

JPMorgan Chase and Bank of America say the US stock market’s recovery will likely be short-lived.

JPMorgan’s trading team believes that the US stock market has a bit more upside potential in the near term amid the de-escalation of President Trump’s trade war, reports Bloomberg.

But the firm warns that the true impact of Trump’s tariffs on the economy has yet to be felt, leading the team to believe that the market is not yet over the hump.

“The combination of light positioning, low liquidity, subdued investor participation means that this market is likely to drift higher in the absence of negative news such as tariff headlines or a spike in bond yields…

[However,] this is not an all clear for markets…

We are still 1-2 months away from seeing the negative impact of the trade war on the real economy.”

The bank’s equity research team shares a similar sentiment, noting it has “a bias to sell risk assets on strength rather than chasing the momentum as a complete shift in narrative will require clearing further headlines.”

Meanwhile, Bank of America’s team of market strategists says the recovery is likely not sustainable, advising clients to “sell into rallies in US stocks and the dollar.”

The bank also says debasement of the US dollar is the “cleanest investment theme to play.”

According to BofA, a depreciating dollar is a strong signal that investors around the world are moving capital away from US assets.

“Weaker US dollar will play out either slowly with lower yields or quickly with higher yields. It’s brutally flagged by the soaring gold price.”

BofA believes that the capital flight from US assets will continue unless the Federal Reserve slashes rates, Trump cuts a trade deal with China and consumer spending remains strong.

The bank also highlights that a weak US dollar suggests that investors are reallocating capital into commodities like gold and foreign stock markets.

The US dollar index (DXY), which measures the strength of the USD against a basket of other major foreign currencies, is down about 8% this year, after witnessing its deepest slide in 16 years last month.

Meanwhile, the S&P 500 is up roughly 15% since its 2025 lows of 4,835 points, which it hit on April 7th.

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