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The Standard & Poor's 500 index is likely to see a correction to between 830 and 875 through September, given its virtually uninterrupted rise since its March lows, J.P. Morgan Securities said, and urged investors to use the correction to build positions in cyclical stocks.
JP Morgan strategists upgraded U.S. industrials and materials sectors to 'overweight' from 'neutral' in anticipation of continued outperformance of cyclical stocks. The S&P 500 index has risen 32 percent since its March lows and much of this move has been powered by cyclicals — discretionary, technology, industrials and materials — and financials, JP Morgan strategists said.
They see a global synchronized economic recovery, with the recent rise in equity markets eventually leading to a four-to-six quarters of above-trend growth sometime in 2010.
But in the near term, a larger correction is still likely, though this could be followed by a strong rally to between 950 and 1000 by the end of 2009, strategists wrote in a note dated June 25. The S&P 500 index gained 19.32 points, or 2.14 percent, to close at 920.26 Thursday.
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