Have investor fears set ASX 200 shares up for a rebound?

Four babies in bouncing harnesses look adorable as they smile at the camera in a line together.

Four babies in bouncing harnesses look adorable as they smile at the camera in a line together.

S&P/ASX 200 Index (ASX: XJO) shares are looking for some direction today.

The index looked to be following the late afternoon rally in US markets yesterday (overnight Aussie time). That rally saw the US S&P 500 rebound from a loss of 1.3% to close 0.6% higher.

ASX 200 shares were down more than 0.4% in morning trade before edging into the green. At the time of writing, they’ve slipped again, down 0.45% in the wake of the RBA’s decision to raise interest rates by 0.25%.

That leaves the benchmark index down 3.7% so far in 2022. That’s significantly better than the 13.4% loss on the S&P 500, although the Aussie and US markets do tend to move in similar directions.

With that in mind, we turn to the bullish outlook for stock markets just out from JPMorgan Chase & Co.

Have investor fears set ASX 200 shares up for a rebound?

Like stocks in the US markets, ASX 200 shares have come under pressure this year on several fronts.

Among the bigger issues, investors are worried that China’s zero-COVID policies will put the brakes on the world’s second-biggest economy. Shanghai, a city with a population greater than Australia, has already been subjected to lengthy lockdowns, disrupting global supply chains. With the virus still spreading, Beijing could face a similar fate.

The second big fear that’s pressured ASX 200 shares and international stocks alike is the outlook for fast-rising interest rates. As the cost of money goes up, growth stocks have been particularly hard hit.

But according to analysts at JPMorgan, led by Marko Kolanovic, those fears look overblown. And the market looks primed for a rebound.

As Bloomberg reports, JPMorgan said the American Association of Individual Investors survey has plunged to the most bearish mark since March 2009.

If you were investing back then, you likely recall the big bounce in stocks that followed. A bounce that saw the S&P 500 gain 45% from 20 March 2009 through to the end of the year.

As for ASX 200 shares? They gained 41% over that same period.

Why negative investor sentiment could herald a market rebound

Noting that US economic growth “is being dented but not derailed” and is expected to pick up in the second half of the year, JPMorgan’s analysts said (quoted by Bloomberg):

Investor sentiment is reaching extreme weakness. This, in combination with light investor positioning and better-than-feared Q1 earnings, should allow the market to rebound…

Worries about China’s growth outlook, a negative take on the Q1 earnings reporting season, concerns about higher bond yields and further tightening of financial conditions from a strong dollar, all appear to have soured equity and credit investors’ sentiment. We find these fears overblown.

Here, JPMorgan was specifically analysing the S&P 500.

But as we noted above, where US markets go, ASX 200 shares tend to follow. And investor sentiment Down Under has certainly been hammered by many of the same factors.

The post Have investor fears set ASX 200 shares up for a rebound? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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