(New York)

It has been a rough road for equities this month. Benchmarks are down 5% and there has been frequent whip-sawing action based on data and news over the trade war. Despite the fears, JP Morgan is telling investors that it is time to buy. The bank’s equity strategists, led by Mislav Matejka think that stocks are going to turn the corner very soon. The bank thinks three elements may catalyze a move higher into the year end—restarted ECB easing, a bigger than expected Fed rate cut, and improving technical indicators on signs the market has bottomed out.

FINSUM: The Fed and the ECB could certainly help support stocks, but it hard to imagine benchmarks gaining much if we keep up the frenzy of trade war news.

(New York)

There are a lot of worries in the market that a recession may be headed the way of both the world generally, and the US more specifically. However, two analysts from well-respected Ned Davis Research have a different opinion. Of their 10 recession indicators which they watch, only one is signaling a recession. In particular, they dismiss five of the market’s biggest worries: the inversion, market breadth, deteriorating economic signals, earnings deceleration, and the trade war.

FINSUM: These guys seem overly optimistic. One of our big questions is whether some weakening signs in the economic actually point to a recession, or are they just part of a temporary ebb.

(Berlin)

American investors keep hearing the same warnings—Europe is slowing, and the malaise is coming for you! But in truth, how bad is the German, and EU economy really looking? The answer is that it is doing quite badly. The manufacturing sector has entered a recession in Germany (the bloc’s largest economy), and the central bank says the country is likely to enter a recession in the third quarter. A big test is going to come this week as numerous consumer data points will be released.

FINSUM: If the gloom has spread to consumers, a recession would appear to be inevitable. The market has sky-high expectations for ECB easing, so let’s hope they are met!

(New York)

Negative bond yields dominate the globe, and US yields are headed inexorably lower. The bond rally that has unfolded year is hard to over-state, with the 30-year Treasury at an all-time low. However, all those gains look likely to reverse sharply, as signs are on the horizon that US inflation is about to jump. The trend in CPI looks likely to show a bump after a series of lower annual highs. The movement is exactly the same as the one that preceded gold’s big jump this year. According to the data, CPI looks likely to rise to 2.5%, which would virtually eliminate the possibility for negative yields on the 30-year bond.

FINSUM: While calling higher inflation is a dangerous game in the post-Crisis world, the general analysis here is reflective of the fact that yields are way too low for how healthy the economy looks in data.

(New York)

Bank stocks are probably not a good bet right now. They suffer when rates fall and they are quite exposed to economic slowdowns (in other words, ignore the new idea that banks are safe dividend producers like utilities). However, there are some banks and financial stocks that look likely to win in the near- to medium-term. Three names to consider: JP Morgan, Amex, and Discover. JP Morgan is basically just a very healthy bank with increasingly competitive pricing which looks likely to grow EPS nicely over the next few years. Amex is an interesting pick because it has a very high quality customer base, and its unique charge card revenue base is not so exposed to falling interest rates, making it much more defensible in a low rate/recession environment.

FINSUM: The Amex pick is quite unique. Their customer base is higher end, so less affected by recession. And their unique revenue model (for a card company) means they have lower interest rate exposure.