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JPMorgan warns investors not to panic

US SPECIAL – There is no need for investors to panic about the impact that Tuesday’s terrorist attack in the US and its ensuing tragedy will have on equity markets, according to JP Morgan’s European equity group (JPM).

JPM says that, in the past, false signals have been put out as a result of rumours about recession and low market volume. Following the Gulf War in the early nineties, the US equity market actually went up, despite being in recession at the start of the campaign.

JPM points out that in Europe, defensives did well after the Gulf War, whilst consumer and industrial cyclicals suffered.

Market volatility is nonetheless expected to remain high over the next couple of months, says JPM, and the tragic events are likely to trigger further deterioration in business confidence in both the US and Europe.
Macroeconomic data before the attack already pointed to a worsening of the global economic situation.

According to JPM, prospects for a turnaround in economic growth will more likely depend on how quickly central banks move to cut interest rates.
This week’s events will probably see cuts made sooner rather than later. Moreover, central banks are likely to be more aggressive than previously anticipated, whereas inflationary pressure induced by sustainable rises in oil prices will largely now depend on the course of events in the Middle East.

Companies offering shares of high security in sectors such as tobacco and food can expect to do well, but airline, hotel, leisure and insurance stocks will probably fall, says JPM.

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