Investors should buy the dip in the stock market as the selloff sparked by last week’s “hawkish surprise” in the Federal Reserve’s meeting minutes is arguably overdone, according to analysts at JPMorgan Chase & Co.
Monetary policy tightening will probably move at a gradual pace, the analysts, led by Marko Kolanovic, wrote in a J.P. Morgan research note Monday. “Markets can handle higher yields.”
Minutes from the Fed’s December meeting released last week rattled markets as they showed the central bank considering raising interest rates sooner and faster against the backdrop of surging inflation. The yield on the 10-year Treasury note TMUBMUSD10Y, 1.757% was trading around 1.78% on Monday afternoon, up from around 1.5% at the end of December.
“Higher bond yields should not be disruptive for equities, but rather support our call for a growth to value rotation,” the J.P. Morgan strategists said in their note.