As inflation eases in the U.S., certain equities are poised to outperform, according to JPMorgan. The October consumer price index report, a measure of inflation , came in weaker than expected on Thursday, signaling that rapid price increases may be past their peak. That’s good news for equities, as it could mean that the Federal Reserve will be less aggressive in hiking interest rates in the next few months, and one step closer to a potential pause on increases, or even a pivot. “After the strong CPI prints of the last several months, we believe inflation is heading the other way (absent another large commodity shock this winter),” said Dubravko Lakos-Bujas, the bank’s chief U.S. equity strategist and global head of quantitative research, in a Friday note. Names poised to gain on lower inflation As this happens, some equities will see more of a benefit than others, according to the note. To identify such names, JPMorgan constructed an inflation underperformer basket, “a portfolio of stocks that are likely to underperform the broader market if inflation continues to rise and is expected to outperform the broader market if inflation surprises on the downside in the future.” Top of the list is e-commerce titan Amazon, which has slumped this year but is still viewed favorably by Wall Street. Costco and Target are also on the list, as well as home improvement retailer Home Depot. Etsy rounds out consumer discretionary names in the group. Popular beverage makers and restaurant chains should also get a boost if inflation eases, according to JPMorgan. Beneficiaries include both Pepsi and Coca Cola, and coffee-chain Starbucks. Chipotle and McDonald’s represent the top restaurants on the list. Some sectors better positioned than others The list is weighted toward consumer staples and consumer discretionary names, which account for 33% and 36% of the portfolio, respectively. Industrials are 15%, and materials and real estate account for 6% and 10% each. “As inflation normalizes to a healthy rate and the cycle turns a corner, we would expect both reflation sensitive and long-duration sectors to outperform,” wrote Lakos-Bujas. “On reflation sensitive, we would expect commodities to continue outperforming (energy, materials, agriculture complex), higher rates beneficiaries to catch up (traditional banks and lenders), and asset-intensive services (e.g., hotels, restaurants, car rentals) to outperform goods producers,” he said. The strategist added that JPMorgan would expect long-duration trades to outperform and win higher P/E valuations from current levels, including names in sectors such as technology, communication services, media and speculative growth. On the flip side, JPMorgan sees crowded low-volatility sectors such as utilities, towers and telecom and healthcare to underperform, under pressure from “fading inflation and recession risks as the Fed tones down its hawkish stance.”
Sumber: www.cnbc.com
