JPMorgan told investors in a note Tuesday that equity multiples appear too high.
The analysts explained that positive news on growth and inflation is fueling optimism for a soft-landing scenario in which inflation returns to target, providing space for developed market central banks to ease.
However, they "remain skeptical of this outcome." The analysts anticipate the inflation decline will "prove incomplete, leaving restrictive policies in place that should increase private sector vulnerabilities and end the global expansion."
"Equity valuations (multiples) are not pricing a soft landing, but rather a continued expansion (no landing) and simultaneous monetary easing (reduction of interest rates and/or QE)," they added. "With no interest rate cuts in sight, ongoing QT and our base case for macroeconomic slowdown, multiples appear too high."
The analysts also noted that while US high-grade credit technicals and fundamentals appear strong at the moment, they are fearful about valuations.