JPM US Market Intelligence | Morning Briefing Sept 16

• MKT THOUGHTS – an assessment of the tactical trading environment, the latest Wall of Worry, what may shift sentiment, and potential trades

• FED DAY – Jay provides us with 5 scenarios and the impact to bonds; Market Intel adds its views on the Equity impact for each of Jay’s scenarios.

• UPDATED: MIDTERM ELECTION SEASONALITY – given inquiries surrounding whether a rally impacts seasonality, we do not find that it does and anticipate a post- election rally.

• US MKT INTEL VIEW – We maintain our Tactically Cautious / Neutral view into the Fed, plus we update the Monetization Menu

JPM MARKET INTEL MORNING UPDATES

• SPX +0.2%, NDX +0.4%, RTY +0.1%. WTI -128bps at $104.48, NatGas +10bps to $2.92, UK NatGas +87bps to £2.0013, Gold +88bps to $4,330, Silver +115bps to $64.40, 10Y @ 5.000%, and VIX @ 17.08.

• US: Futures are higher into Fed Day where consensus is for a 25bp hike with unknown levels of communication. The market looks to climb the latest Wall of Worry across Fed, AI, and SoH-induced inflation. Bond yields are down 1-2bp with USD flat. Cmdtys are higher led by Metals (Precious over Base) and Ags with crude/fuels seeing some profit-taking. Pre- mkt Eqys, Semis / Memory / Mag7 are all higher with Semis the driver; Software is lower.

Cyclicals are outperforming Defensives as the AI theme is pushing both Tech and Industrials higher, though HC is higher too.

• EU/UK: Major markets are all higher ex-Germany with Italy leading. Gilt yields are lower while the rest of the region sees a bearish move. Top D1 baskets include Semis, AI Energy, Gold, and LT Momentum Longs; alternatively, AI Disruptors, Freight Rate Sensitives, Software, and LT Momentum Shorts are at the bottom of the leaderboard. Thematically, LT Momentum / Beta are leading, ST Momentum / Value are lagging. This follows a stronger APAC session led by Korea / Japan. UKX +0.3%, SX5E +0.2%, SXXP +0.2%, DAX +0.0%. CSI +0.7%, HSI +0.2%, NKY +0.7%, ASX +0.3%, KOSPI +1.4%.

• US MACRO DATA: Mortgage Applications at 7am ET. NY Fed Services Business Activity, Retail Sales, Import Price and Export Price at 8.30am ET. Business Inventories and NAHB Housing Market Index at 10am ET. FOMC Rate Decision at 2pm ET. TIC Flow at 4pm ET.

• GLOBAL MACRO DATA: (UK) CPI/PPI at 2am ET. (Eurozone) IP at 5am ET.

JPM MARKET INTEL EQUITY & MACRO NARRATIVE

As markets continue to chop sideways/lower, short-term variables have created another Wall of Worry that stocks must climb before resuming their bull run. We think those variables are (i) Fed; (ii) AI Fears; (iii) US / Iran.

• FED – Several scenarios are detailed below, and consensus seems to be that the Fed hikes 25bp, but that Warsh provides no forward guidance. In this event, Stocks likely use guidance from the Treasury market which is pricing in ~53bp of hikes, inclusive of today’s Fed meeting. This outcome is fine for stocks but would be better if Warsh provides guidance