JPMorgan issues stock market warning

Investors crowding into top-performing stocks increases the risk of a correction, according to JPMorgan’s global equity strategist. The clustering of investors into top-performing stocks increases the risk of a sudden correction, banking strategist Dubravko Lakos-Bujas warned in a note to clients on Wednesday that investors could “get stuck on the wrong side” when momentum trading stalls. Lakos-Bujas said investors should think about risk management in their portfolios and called for diversification of assets. “A big fund starts to cut some positions, a second fund hears about it and tries to reposition, a third fund is caught off guard. You know what happens next; we start to have a much bigger momentum unraveling,” Lakos-Bujas said. Lakos-Bujas’ warning came as the S&P 500 index was on track to return about 10% in the first quarter. Strong corporate balance sheets, excitement over artificial intelligence technology, and the fact that the U.S. economy shows no signs of recession were effective in this rally. According to a JPMorgan strategist, the decline in Tesla and Apple shares after 2023 was an example of what could happen after a cluster in certain stocks.