- Value stocks present a strategic opportunity centered on COVID-19 vaccinations, says JPMorgan.
- Value stocks are down by as much as 30% versus growth stocks since last year.
- Energy and travel-related stocks are still open for gains driven by vaccine-driven plays.
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The biggest opportunity lies in value stocks for investors still looking for ways to capitalize on the continued rollout of COVID-19 vaccinations, says JPMorgan.
The bank said there’s been “unusually broad” market momentum since November, which is when drug maker Pfizer said it had produced a highly effective coronavirus vaccine candidate with partner BioNTech. Global equity markets have since shot up to all-time highs on the outlook for vaccines to underpin economic recovery.
That means there’s “not much left to position for,” in terms of COVID-19 premia based on price dislocations relative to a year ago, said cross-asset strategists at JPMorgan in a note published Tuesday.
But value stocks present the “greatest opportunity” across equities and the fixed income, currencies and commodities market, as they are still down about 30% relative to growth stocks since February 2020. JP Morgan said it is overweight value stocks versus growth stocks.
There are also still opportunities in the energy sector and sub-sectors like airlines, commercial real estate, cruise lines and hotels, which are still down 20%-30% from prepandemic levels.
“Vaccines should matter more at the level of sectors and styles, which are still dislocated, rather than at the level of asset classes, which are not,” said JPMorgan strategists led by John Normand, head of cross-asset fundamental strategy.
But a commitment by the Federal Reserve and President Joe Biden to achieve “even fuller employment and higher inflation than what previous cycles have delivered,” is what should prove more impactful at the asset class level, the firm said.
The bank did point out that a major systemic risk this year would be a “disorderly Fed tapering” later in 2021, “because Biden’s fiscal stimulus might deliver what the Fed will consider ‘substantial further progress’ towards full employment and price stability.”