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Economists at JP Morgan Asset Management remain intensely focused on what is happening with corporate profits, as over the long-run, earnings are the main driver of equity returns.

Key quotes

“Nearly half of S&P 500 companies have reported 1Q20 earnings, and our current estimate is for a -20% decline relative to a year prior.”

“At the end of the day, the stock market seems to be focused on three things: slower growth in the number of cases of COVID-19, the massive amount of fiscal and monetary stimulus that has been announced in recent weeks and the expectation of a v-shaped recovery in the economy and corporate profits. The first two drivers of the market rally are fact, but the third seems to be fiction.”

“While we anticipate a recovery into the end of 2020 and beginning of 2021, we do not think it will be as robust as consensus expects.”