We no longer support this browser. Using a supported browser will provide a better experience.

Please update your browser.

Close browser message


The path forward: Breakout or breakdown?

No matter where markets are heading next, we see opportunity. Consider these strategies to be ready for the next meaningful move.

Our Top Market Takeaways for May 19, 2023

MARKET UPDATE: Breakdown, breakout, or rangebound?

Times are tricky. The market narrative flits from soft to hard to no landing in as quickly as a day’s time. Some look at the S&P 500’s 10% year-to-date rally and find comfort – others see a flashing warning sign.

Is the market headed for a breakdown, a breakout or will it just stay rangebound? Today, we explore the paths forward and offer our take.


Rate hikes have consequences, and with inflation stubborn and sticky at 4-5%, the risk is that the Fed has to do even more (markets are already betting on a 40% chance of another hike next month). Bank stress seems to rear its head every few weeks, and even if it doesn’t unwind into a full-blown crisis of confidence, the flow of credit to the economy is drying up. Banks are tightening lending standards, and some measures for loan demand are at their weakest since 2009. Ripples are already being felt in the office real estate sector. 

With costs high and credit getting scarcer, companies may struggle to turn a profit and cut costs, including through layoffs. Job openings are now at their lowest in almost two years, and employees seem to be less confident in finding another job if they need to – it’s only a matter of time before the cracks expand into full-blown layoffs. With fewer jobs to go around, the consumer tends to become either less willing or less able to spend. That puts a stopper on economic activity – and that’s not even layering in the fallout risk from the still-unresolved debt ceiling debate.

That foreboding backdrop mobilizes bears that think the stock rally just can’t last. Even with Q1 earnings season shaping up better-than expected the last few weeks, the S&P 500 has traded pretty much flat through it all. What’s more, much of this year’s gains have been in thanks to big tech leading the charge: Apple, Microsoft, NVIDIA, Meta, Amazon and Alphabet have contributed about 8.3% out of the S&P 500’s 10.0% year-to-date rally.

All that leaves the market expensive for a gloomy outlook, and the tradeoff between stocks and bonds not all that compelling. The forward P/E multiple of the S&P 500 is nearing 18.5x again, and the spread between what you can yield from earnings and what you can get from bonds is the tightest of the last 10 years. 


The market has climbed the wall of worry. And it’s not without reason: the economy is defying gravity, and by some measures, it’s improving.

Houses seem to be selling again, and homebuilder sentiment has increased for five straight months, now at its highest since last July. Manufacturing looks like it’s turning a corner – yesterday’s read on the Philadelphia Fed’s Manufacturing for April came in way above expectations. What’s more, after an initial step up at the start of the year, the number of Americans filing new claims for unemployment hasn’t really budged since March. There are also still 1.6 job openings for every unemployed person.

That all might be problematic if inflation was also reaccelerating – but today’s signs suggest the opposite. Taking a cue from last week’s U.S. CPI report, shelter prices finally seem to be slowing, the Fed’s “supercore” core services ex-shelter measure (which is closely tied to the labor market) saw its softest gain since last July, and outside of used autos, core goods inflation saw its slowest pace in over two years.

Better growth with cooling inflation is a *chef’s kiss* backdrop for stocks. A closer look suggests it’s not all just tech, either. Almost 80% of S&P 500 companies reported earnings that were better than expected (the highest beat rate since 2021 and above the 10-year average), and estimates for earnings in the year ahead are broadly increasing. There are also 35 companies in the S&P 500 that are currently within 1% of their 52-week high, and only five (Alphabet, Apple, Microsoft, Meta and NVIDIA) are in the mega-cap tech category.

In all, it’s now been over seven months since the S&P 500 hit its lows back in October – that tends to mean the lows are in, and it also tends to bode well for future returns. When the S&P 500 has made it seven months or more without a new low in the past, it’s been higher 86% of the time over the following year.


Things are just OK – they’re not great, but they’re not bad either. Economic momentum is slowing, and a recession is still probable, but it doesn’t seem like it’s all going to fall off a cliff. Bank stress and debt ceiling negotiations are still a risk, but seem to be getting better. Valuations are high – and that may limit the amount of upside from here – but it also seems like the worst is behind us. After all, both stocks and bonds already went through a reckoning last year in anticipation of weaker growth this year.

The consumer (which makes up some 70% of the U.S economy) offers a good illustration. According to the latest credit and debit card data from Bank of America, household spending fell -1.2% year-over-year in April – the first decline since February 2021. But under the hood, lower-income households – which have little to no excess savings still on hand – are actually outspending their higher-income peers (in large thanks to that still-strong jobs market). Earnings from retail giants this week like Walmart, Target and Home Depot likewise echoed this sentiment, all reporting earnings beats but noting customers are getting thriftier with their purchases.

The S&P has now gone six weeks without a 1% weekly move in either direction – the longest stretch since the summer of 2019. As a shrinking supply of credit crunches its way through the economy, that choppiness could continue as different sectors slow at different times.

Where we land:

We’re in the rangebound to cautiously optimistic camp. At an index level, we think stocks will be higher both six and 12 months from now. But even if the summer sees a sprint, the whole process may be wrought with fits and starts along the way. While that might feel hard to navigate at times, we see opportunities.

Sectors like reasonably-priced technology and healthcare, as well as ex-U.S. markets, can provide relative safety in stormier weather, while small- and mid-cap stocks can help position for the next cycle as this one ages. In the meantime, choppy markets can be the bread and butter of strategies like structured notes and hedge funds, and can offer nervous investors a way to capitalize on the upside and protect on the downside. We also think bonds can offer strong returns in a world where growth takes a hit or where inflation slows without too much damage.

In all, both a breakdown or breakout are possible, but for either path, a multi-asset class portfolio may be best served to help you prepare. Your J.P. Morgan team is here to offer insights for your portfolio.


All market and economic data as of May 18, 2023 and sourced from Bloomberg and FactSet unless otherwise stated.

Small capitalization companies typically carry more risk than well-established "blue-chip" companies since smaller companies can carry a higher degree of market volatility than most large cap and/or blue-chip companies.

International investments may not be suitable for all investors. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Some overseas markets may not be as politically and economically stable as the United States and other nations. Investments in international markets can be more volatile.

Diversification does not ensure a profit or protect against loss.

The Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Bloomberg Eco Surprise Index shows the degree to which economic analysts under- or over-estimate the trends in the business cycle. The surprise element is defined as the percentage difference between analyst forecasts and the published value of economic data releases.

The NASDAQ 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.

The MSCI World Index is a broad global developed markets equity benchmark designed to support: Asset allocation: Consistent, broad representation of the performance of developed equity markets worldwide, without home bias.

The Bloomberg Aggregate Bond Index or "the Agg" is a broad-based fixed-income index used by bond traders and the managers of mutual funds and exchange-traded funds (ETFs) as a benchmark to measure their relative performance.

The NYSE FANG+ Index is an equal-dollar weighted index designed to represent a segment of the technology and consumer discretionary sectors consisting of highly-traded growth stocks of technology and tech-enabled companies such as Facebook, Apple, Amazon, Netflix, and Alphabet's Google.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.


  • Past performance is not indicative of future results. You may not invest directly in an index.
  • Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk.  Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.
  • The price of equity securities may rise or fall due to the changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Equity securities are subject to 'stock market risk' meaning that stock prices in general may decline over short or extended periods of time.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • As a reminder, hedge funds (or funds of hedge funds) often engage in leveraging and other speculative investment practices that may increase the risk of investment loss. These investments can be highly illiquid, and are not required to provide periodic pricing or valuation information to investors, and may involve complex tax structures and delays in distributing important tax information. These investments are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any such fund. For complete information, please refer to the applicable offering memorandum.
  • Structured products involve derivatives and risks that may not be suitable for all investors. The most common risks include, but are not limited to, risk of adverse or unanticipated market developments, issuer credit quality risk, risk of lack of uniform standard pricing, risk of adverse events involving any underlying reference obligations, risk of high volatility, risk of illiquidity/little to no secondary market, and conflicts of interest. Before investing in a structured product, investors should review the accompanying offering document, prospectus or prospectus supplement to understand the actual terms and key risks associated with the each individual structured product. Any payments on a structured product are subject to the credit risk of the issuer and/or guarantor. Investors may lose their entire investment, i.e., incur an unlimited loss. The risks listed above are not complete. For a more comprehensive list of the risks involved with this particular product, please speak to your J.P. Morgan team.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Structured products are complex debt obligations of a corporate issuer the return of which is linked to the performance of an underlying asset. They are significantly riskier than conventional debt instruments and may not be suitable for all investors.
  • Investment in alternative investment strategies is speculative, often involves a greater degree of risk than traditional investments including limited liquidity and limited transparency, among other factors and should only be considered by sophisticated investors with the financial capability to accept the loss of all or part of the assets devoted to such strategies.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.



All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

Bonds are subject to interest rate risk, credit and default risk of the issuer. Bond prices generally fall when interest rates rise.​ Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss. 

Check the background of Our Firm and Investment Professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our  J.P. Morgan Securities LLC Form CRS and  Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.


Equal Housing Opportunity logo

J.P. Morgan Chase Bank N.A., Member FDIC Not a commitment to lend. All extensions of credit are subject to credit approval 

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment advisor, member FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.