JPMorgan traders end the "bearish US stock trading" and shift to "neutral," exploring the possibility of re-initiating long positions in gold

Ask AI · Why Did JPMorgan Shift to Neutral While the S&P 500 Tested the 200-Day Moving Average?

JPMorgan’s market intelligence team announced the closure of its “tactical bearish” strategy about three weeks after the S&P 500 index dropped 200 to 300 points, shifting to a neutral stance while beginning to assess the possibility of re-establishing a long position in gold.

On March 25, JPMorgan’s market intelligence department stated in an internal report that this strategic shift does not imply a bullish outlook on U.S. stocks. The team explicitly mentioned that they would not be buying on dips but rather tend to hold long positions in energy and large-cap tech stocks while using hedging tools at the index and sector levels to strip away directional risk.

The report pointed out that the key variable determining the market’s next steps is whether the geopolitical situation escalates further. If a ceasefire agreement is reached, the team expects it to trigger a “full rebound” market; conversely, any new signals of escalation will pose new downward pressure. Meanwhile, the progress of the $200 billion emergency budget in the U.S. also deserves attention.

Notably, the bank’s market intelligence department also mentioned in the report that it has begun to establish a “shopping list” to prepare for a ceasefire scenario, and gold longs have been highlighted as a key focus.

About three weeks of bearish trading concludes, shifting does not equal bullish

The report stated that JPMorgan’s market intelligence department adjusted its stance to “tactical bearish” about three weeks ago, during which the S&P 500 index subsequently dropped 200 to 300 points. Now, as the S&P 500 index tests the 200-day moving average from below, the team has chosen to close positions at this juncture and update their stance to “neutral.”

However, the report clearly states that “neutral” means not chasing gains and not bottom-fishing, rather than turning bullish. The core logic behind this is: the current uncertainty in the geopolitical situation remains high, and the market direction is still unclear, making it imprudent to take on directional exposure rashly.

In terms of positioning, JPMorgan traders recommend adopting a market-neutral strategy: maintaining long exposure in energy and large-cap tech stocks while hedging overall directional risk using hedging tools such as the S&P 500 index (SPX), Russell 2000 index (RTY), and sector-level hedges in materials and consumer staples.

The team emphasized that this does not represent a significant restructuring of the overall investment portfolio but is a pragmatic choice to manage and reduce directional exposure in the context of frequent market disturbances related to ceasefire and ceasefire-like news.

Gold Returns to Focus

It is noteworthy that JPMorgan traders specifically mentioned the potential to re-establish long positions in gold in this strategy update.

The team’s analytical logic is: as the portfolio completes a relatively aggressive de-risking operation, the recent negative correlation between gold and the U.S. dollar may loosen. In other words, gold, which was previously suppressed by de-risking sell-offs, may be expected to reflect its safe-haven properties again as the market structure stabilizes.

Currently, gold longs have been included in the team’s “shopping list” prepared for a ceasefire scenario, but it has not yet constituted a clear trading directive, more reflecting a forward-looking willingness to position for potential opportunity windows.

Escalation or Ceasefire, Determining the Market’s Next Direction

JPMorgan views the evolution of the geopolitical situation as the core driving variable for the current market and has outlined four types of escalation scenarios that could trigger a new round of market declines:

First, attacks on energy infrastructure, particularly targeting Saudi oil production and refining facilities;

Second, the involvement of U.S. ground forces or the use of military force to reopen the Strait of Hormuz;

Third, attacks by the U.S. or Israel on Iranian civilian infrastructure;

Fourth, any attacks on water supply sources.

The report also notes that as long as the Strait of Hormuz remains “closed” to Western allies, the global energy crisis will continue to spread and may further extend to food, industrial gases, and their derivatives.

Regarding the ceasefire path, JPMorgan’s market intelligence department believes that if negotiations do not achieve substantive progress before the weekend, the market may see a pullback; however, once an agreement is formally reached, it will trigger a “full rebound” across various assets.

The team expects that the market will relatively quickly move towards a clear direction—either the advancement of the ceasefire process or the arrival of a new wave of escalation.

U.S. Military Aid Budget and Earnings Season, Two Observational Windows

In addition to the geopolitical situation itself, JPMorgan’s market intelligence department has also highlighted two subsequent signals worth closely tracking.

The first is the progress of discussions regarding the over $200 billion emergency military aid budget in the U.S.

The team pointed out that the scale of this funding is sufficient to support U.S. actions extending into August this year and possibly longer. If Congress advances this budget agenda, it would mean the market needs to prepare for a conflict that lasts longer than expected.

The second is the upcoming earnings season for U.S. stocks starting in April.

The report notes that the long-term impact of geopolitical conflicts on the U.S. market, as well as the eventual patterns of winners and losers, may only become clear after corporate management provides substantive statements during the earnings season.