JPMorgan Chase's trading desk, once hailed as the most accurate predictor of 2026, has changed its stance again: ending its bullish outlook since June and adopting a "tactical cautious" approach to US stocks.

JPMorgan's Market Intelligence Trading Desk has gained widespread attention this year for a series of accurate market turning point predictions. Now, it has adjusted its stance again—from bullish to "tactical cautious/neutral," citing increased uncertainty about the Fed's policy path, crowded market positioning, seasonal pressures, and a significant pullback in momentum factors .

In its latest morning report, the team pointed out that the overall fundamentals of the stock market remain sound, but with multiple short-term variables converging in the next two to three weeks, the market is likely to enter a sideways consolidation phase. While a significant correction at the index level is not expected, "further volatility at the sub-indices and individual stock levels would not be surprising."

JPMorgan's Market Intel trading desk, led by Andrew Tyler, focuses on institutional client services, differing from the bank's traditional sell-side research department. According to ZeroHedge, the team's market judgment record in 2026 was quite impressive: firmly bullish at the beginning of the year, then promptly shifting to "tactical caution" and even bearish after the surge in commodity prices triggered by the US-Iran conflict; closing short positions a few weeks later, turning neutral before the March lows; reverting to bullish during the rapid market rally from April to June, switching back to neutral near the top; and reverting to tactical bullish again after a slight pullback in mid-June.

This marks another significant shift in the team's stance this year, and is also the first downgrade since turning bullish in mid-June.

The Fed's policy path becomes the biggest variable

The primary factor prompting the team's shift was the repricing of expectations regarding Federal Reserve policy. According to the team's interpretation of Fed Chairman Warsh's speech in Jackson Hole, key signals included: the labor market has reached full employment; inflation remains high; the Fed will use the PCE as a measure of inflation; the tool to combat inflation will be the federal funds rate rather than quantitative tightening; and current financial conditions are not restrictive.

These statements make the September policy meeting an "active one." The bond market's implied probability of a September rate hike has risen from about 35% to about 58%. The team points out that this week's non-farm payroll (NFP) data and next week's CPI data on September 11 will be key inputs, with the CPI being more important.

Six reasons to support the tactical shift

In addition to the Federal Reserve factor, the team listed five other reasons that drove this stance adjustment.

Regarding market positioning , JPMorgan's positioning intelligence team warned that current positioning signals are not clear enough, and historical experience shows that the market will fluctuate in the next 3 to 4 weeks, with a rapid rebound in momentum factors unlikely.

Regarding credit spreads , the two weeks following Labor Day historically often see a peak in corporate bond issuance, widening spreads and putting pressure on the stock market. Given that recent AI-related trading has already been dragged down by widening CDS spreads, this risk warrants attention.

In terms of seasonality , September has historically been the worst-performing month for the S&P 500. The seasonal pattern of midterm election years is usually characterized by pre-election pressure and a strong rebound after the election. Since 1990, the average gains of the S&P 500 in the 3, 6, 9, and 12 months following the midterm elections have been 5.4%, 11.4%, 12.5%, and 14.7%, respectively, with a success rate between 78% and 100%.

In terms of momentum factor retracement , the JPMorgan JPMPURE momentum index has fallen more than 21% from its June historical high, while the "classic" momentum index JPPQMO has fallen nearly 34% from its high, both exceeding the typical retracement range of 10% to 15%.

Regarding AVGO's financial report , the team believes that even with strong performance, it may be difficult to drive a substantial increase in the stock prices of the AI, storage, and semiconductor sectors.

Go long on the Nasdaq, short on the Russell 2000, and pay attention to large banks.

In terms of specific strategies, the team suggests starting with a long position in the Nasdaq 100 (NDX) and a short position in the Russell 2000 (RTY). Within the technology sector, given the difficulty in maintaining buying interest in AI, storage, and semiconductors, the "Mag7" is the preferred choice in the near term; the software sector remains attractive, especially given the continued decline in semiconductors. Small and mid-cap stocks (SMID-caps) are likely to underperform in this tactical adjustment.

Regarding cyclical stocks, if this week's ISM data exceeds expectations, some cyclical sectors still have room for growth. Large bank stocks will benefit from the economic growth narrative and loose financial conditions, while the consumer discretionary sector will be attractive when energy prices decline. Among defensive sectors, healthcare has historically performed best before midterm elections.

Regarding hedging tools, the team favors shorting credit ETFs and buying VIX products. Before the Fed meeting concludes on September 16th, "dollar depreciation" trades may face resistance, and the team recommends switching cash positions to derivatives positions. Furthermore, the team points out two major external risks that need continuous monitoring: first, whether the US and Iran can reach an agreement, or whether there will be new actions pushing up oil prices; and second, whether the US-Canada trade dispute will escalate further.

Risk warning and disclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.