JPMorgan traders end "bearish US stock trades," turn "neutral," explore "possibility of going long gold again."
After executing a "tactically bearish" strategy for about three weeks, during which the S&P 500 Index dropped 200 to 300 points, JPMorgan's Market Intelligence Division announced it was closing the trade, shifting to a neutral stance, and beginning to evaluate the possibility of re-establishing long positions in gold.
On March 25, JPMorgan's Market Intelligence Division stated in an internal report that this strategic shift does not indicate bullishness on U.S. equities. The team clearly stated it would not buy on dips; instead, it prefers to hold long positions in energy and large-cap tech stocks while using index and sector hedging tools to strip out directional risk.
The report points out that the key variable determining the next move in the market is whether geopolitical tensions escalate further. If a ceasefire agreement is reached, the team expects a "broad market rebound"; otherwise, any new escalation signals will pose fresh downward pressure. Meanwhile, the progress of the US $200 billion emergency budget proposal is also worth watching.
Notably, the market intelligence division also disclosed in the report that it is prepping a "shopping list" to prepare for a ceasefire scenario, with gold longs being listed as a major focus.
Three-week bearish trade ends, shift does not mean bullishness
The report says that about three weeks ago, JPMorgan's Market Intelligence Division shifted to a "tactically bearish" stance, during which time the S&P 500 Index fell 200 to 300 points. Now, as the S&P 500 tests the 200-day moving average from below, the team chose this point to close out positions and update its stance to "neutral".
However, the report explicitly states that "neutral" means neither chasing rallies nor bottom-fishing, not a shift toward bullishness. The core logic is: the current uncertainty of geopolitical tensions remains high, market direction is unclear, and taking on directional exposure rashly is not prudent.
In terms of positioning, JPMorgan traders recommend adopting market-neutral strategies: maintain long exposure in the energy sector and large-cap tech stocks, while using hedging tools such as the S&P 500 index (SPX), Russell 2000 index (RTY), as well as sector hedges in materials and consumer staples to hedge overall directional risk.
The team emphasizes this is not a major overhaul of the investment portfolio, but a pragmatic choice to centrally manage and reduce directional exposure, given frequent market disturbances from ceasefire and related news.
Gold back in focus
It’s worth noting that JPMorgan traders specifically mentioned the potential to re-establish long positions in gold in this strategy update.
The team’s analysis logic: as aggressive de-risking was completed, the recent negative correlation between gold and the dollar may loosen. In other words, gold, which was previously suppressed by de-risking sales, is expected to reassert its safe-haven characteristics once market structure stabilizes.
Currently, gold longs have been added to the team's "shopping list" prepared for the ceasefire scenario, but have not yet become concrete trading instructions, reflecting a willingness to proactively position for potential opportunities.
Escalation or ceasefire: key to the next market direction
JPMorgan regards geopolitical developments as the core driver of the current market and lists four escalation scenarios that could trigger another market selloff:
First, attacks on energy infrastructure, especially Saudi oil production and refining facilities;
Second, US ground forces intervention or use of military power to re-open the Strait of Hormuz;
Third, US or Israeli strikes on Iranian civilian infrastructure;
Fourth, any attacks on water resource supply.
The report also points out that as long as the Strait of Hormuz remains "closed" to Western allies, the global energy crisis will continue to spread and may further impact food, industrial gases, and their derivatives.
Regarding the ceasefire path, JPMorgan's Market Intelligence Division believes if no substantial progress is made before the weekend, the market may see a correction; but once the agreement is officially struck, a broad-based rebound across asset types will be triggered.
The team anticipates the market will soon move toward a clear direction—either progress in the ceasefire process or the arrival of a new escalation wave.
US military budget & earnings season: two follow-up watch points
Besides geopolitics, JPMorgan's Market Intelligence Division highlights two important follow-up signals to closely track.
First is the progress of the US domestic debate on the emergency military aid budget, totaling more than $200 billion.
The team notes that the scale of this package is sufficient to support US related actions through August or beyond this year. If Congress moves forward with the budget agenda, the market must prepare for a conflict that is longer-lasting than expected.
Second is the upcoming US equity earnings season in April.
The report notes that the long-term impact of geopolitical conflict on the US market, and the final winners and losers, may only become clear after company management gives substantive commentary during earnings season.
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