JPMorgan Stock Remains a Buy Into Corrections

  • JPMorgan (JPM) is back to levels not seen since 2020.
  • JPM stock is approaching a potential reprieve.
  • Smart money doesn’t discount this company’s ability to rebound.
Source: Shutterstock

JPMorgan (NYSE:JPM) stock has had better starts to years. But in all fairness, it is not alone in its suffering. The whole market fell apart from the start of 2022. But the pain in JPM is worse than the declines for the S&P 500. So, there is room for improvement, but the trick is finding a bottom. This is difficult to do when there are this many headwinds facing equities. The geopolitical risks from the war in Ukraine have not abated. Moreover, this week we learned that President Joe Biden is perhaps sending troops to Somalia.

Additionally, the U.S. Federal Reserve (Fed) is in full swing with its war on inflation. The rhetoric from the Fed suggests that they are willing to kill the economy in the process. It is no wonder that stocks are not suffering more. The bears have had a massive tailwind for months.Even the Bitcoin (BTC-USD) bulls have retreated to the quiet shadows.

I am less pessimistic and still see the potential for new all time highs. But for that to happen, the bulls must first establish footing. Therefore, I am realistic with my immediate expectations, especially for JPM stock and the banking and financial sectors.

JPM JPMorgan Chase & Co. $121.28

JPM Stock Is Fighting the Fed

JPMorgan (JPM) Stock Chart Showing Important Support
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Source: Charts by TradingView

There is an old adage on Wall Street: “Don’t fight the Fed.” JPM, whether it wants to be or not, is toe to toe with it. For years, central banks have gotten all kinds of perks for simply doing their job. The goal was to fatten up the lenders to spruce up the economy. That strategy has now flipped, so the gravy train has ended. So far, the Fed’s efforts have not perhaps affected the banks’ profit and loss statements yet. But eventually, if the lending environment tightens, banks will suffer.

The good thing is that since the 2008 economic collapse, banks have bulletproof balance sheets. At some points, the income statement will offset that value with a detriment. The yield curve of the three-month versus the five-year bond is still steep enough to not raise too many alarms. Mainstream media is perhaps focusing on the wrong curve. This may frustrate the Fed to the point of becoming even more hawkish. If that happens, they risk needing to flip to quantitative easing again. They tried this in 2018 and they failed. Why not now?

Back then, the “autopilot” comment did the trick. This time, Fed Chair Jerome Powell disguised the same comment well in their last event. We learned that the Fed plans for two more hikes and six months of asset sales. That’s an autopilot program in my book.

Even though I fear a bearish Fed, the banks have valuable business. They have no specific intrinsic issues, so all they need to do is adapt to the new normal. With $49 billion in cash from operations, JPM stock has nothing to fret. Additionally, there may be help coming from the charts. The area between $112 and $105 per share has been pivotal since the pandemic. I bet that it harbors willing buyers there.

There are also more bullish technical patterns coming to life for long-term investors. Therefore, those looking for safe harbor trades should consider owning some JPM stock now.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Nicolas Chahine is the managing director of SellSpreads.com.


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