JPMorgan Chase's trading desk has decided to temporarily shelve its bullish stance on US equities, pivoting to a cautious approach for the coming weeks.

The shift comes after Federal Reserve Chair Warsh delivered hawkish remarks last week, which significantly boosted market bets on further rate hikes this year. This renewed uncertainty around the interest rate path has emerged as a primary near-term pressure point for stocks.

However, JPMorgan Chase emphasized that this move does not mean it has turned bearish on the US market. The bank maintains that economic data and corporate earnings remain supportive, and the fundamental backdrop for equities is still solid. Yet, with the Fed's next rate decision slated for September 16, a confluence of short-term uncertainties could push the market into a consolidation phase.

The trading team, led by Andrew Tyler, head of US market intelligence at JPMorgan Chase, noted in a Monday client report that given the significant uncertainty surrounding the future rate trajectory ahead of the September 16 policy meeting, they have decided to abandon their previous bullish outlook for now. Tyler acknowledged that market fundamentals remain robust, but a series of near-term factors over the next few weeks could lead to sideways trading, prompting the team to adopt a wait-and-see stance.

The most prominent change stems from Fed policy expectations. At the closely watched Jackson Hole symposium on Friday, Warsh stated that US inflation has not shown any meaningful slowdown and reiterated the Fed's commitment to bringing price pressures back to its 2% target. This rhetoric quickly reinforced market expectations for a resumption of rate hikes. Tyler pointed out that if the Fed does begin raising rates, it is currently difficult for investors to gauge how long this tightening cycle might last and what the cumulative hike magnitude could be. Moreover, Warsh is less inclined than his predecessor to pre-communicate the future rate path to markets, adding another layer of difficulty for investors trying to anticipate policy direction.

With escalating Middle East tensions pushing oil prices higher, concerns about US inflation have intensified, and Treasury yields continued their upward climb on Monday. The 10-year yield broke above 4.75%, reaching levels not seen since January 2025. Meanwhile, rate swap markets indicate investors now price in nearly a 70% probability of a 25-basis-point rate hike at the September Fed meeting.

The resurgence in rates is applying fresh pressure on US stocks. Higher Treasury yields raise corporate borrowing costs, while a rising risk-free rate diminishes the relative appeal of high-valuation equities. Consequently, growth stocks and rate-sensitive sectors like utilities are more vulnerable to such shocks.

Notably, Tyler has a track record of accurately gauging near-term risks in the equity market. He turned cautious in early June, ahead of a multi-week decline in stocks. Now, in turning cautious again, he has flagged three primary short-term risks: considerable uncertainty in the rate outlook, September's historically weak seasonal performance for equities, and the potential unwinding of momentum trades in the AI-related stocks that have rallied sharply.

However, Tyler also noted that investors' overall net positioning in the stock market remains roughly neutral, with no signs of extreme crowding. As the market enters September, it will also face seasonal headwinds. Historically, September ranks among the weakest months for US equity returns. This year's situation is more complex, with investors needing to assess not only whether the Fed will resume hikes but also whether the AI investment boom, a key driver of the recent rally, can sustain itself. The AI stocks that have surged could face profit-taking and momentum outflows. If Treasury yields continue to rise concurrently, high-valuation tech names could see increased valuation pressure.

Monday already saw some market pullback. Rate-sensitive utilities led the declines, while renewed US-Iran attacks, roughly a month after their last exchange, pushed oil prices higher and boosted energy stocks against the trend. The S&P 500 closed down 0.33% for the day. Still, the index has gained about 2.5% since the start of August, putting it on track for its best August since 2021.

Before the Fed's September 16 meeting, two closely watched economic data releases are due. First, the August nonfarm payrolls report arrives this Friday. Economists expect that after an unexpected drop in July employment, August payrolls may have increased by around 55,000, roughly in line with the average pace of job growth this year. However, Tyler believes that the consumer price index (CPI) data, due on September 11, may carry more weight than the jobs report. His reasoning is that Warsh views the US as already at full employment, making inflation the focal point of current Fed policy. If August CPI remains stubborn or comes in above expectations, investors might raise their bets on a September hike. Conversely, a notable downside surprise in inflation could weaken the case for immediate policy tightening. Thus, ahead of the September 16 meeting, both jobs and inflation data could directly influence market expectations of the Fed's policy path and become key swing factors for near-term US equity direction.

Despite the short-term cautious turn, JPMorgan Chase is not signaling an end to the bull market. Tyler noted that historically, equity bull markets typically conclude due to one of two factors: the onset of a rate-hiking cycle or an economic recession. At present, the probability of a US recession in the coming quarters remains very low, so the economic backdrop does not yet justify calling an end to this bull run. What warrants vigilance, however, is the possibility that Fed policy direction is shifting again. Warsh's hawkish remarks last week mean the September 16 meeting is no longer viewed as a foregone conclusion; a rate hike is now a live option. Moreover, given Warsh's reluctance to provide a clear rate path in advance, if the Fed does resume hikes, investors would need to reassess the potential duration of the entire tightening cycle and the eventual peak level of rates.

Therefore, JPMorgan Chase's temporary abandonment of its bullish stance is more about hedging against near-term volatility than a全面 shift to pessimism. With rising rate uncertainty, weak seasonal trends in September, and potential momentum unwinding in AI favorites, US stocks may largely trade in a range in the short term. However, as long as the US economy avoids a recession and corporate earnings continue to provide support, the bank believes the fundamental case for equities remains intact.