JPMorgan Forecasts 5000 Billion Dollar Inflow to U.S. Stocks Driven by Retail Investors

JPMorgan Chase & Co. has forecasted that approximately 5000 billion dollars will flow into the U.S. stock market in the second half of the year, potentially driving the market up by 5% to 10%. This prediction is primarily supported by retail investors, while the contribution from hedge funds and institutional investors is expected to be limited. The strategy team estimates that the total expected size for the year is 6300 billion dollars.

Despite the limited increase in holdings by hedge funds and institutional investors, as well as the structural selling of stocks by pension funds, the potential buying power of retail investors, risk parity funds, and balanced mutual funds is strong enough to offset these selling pressures. Additionally, if the dollar stabilizes, previously abstaining foreign funds may return, further fueling the market.

The report highlights that while hedge funds and institutional investors have limited room for further significant increases in their positions, the potential buying power of retail investors, risk parity funds, and balanced mutual funds is substantial. This buying power is expected to offset the selling pressures from pension funds and other institutional sellers, providing upward momentum to the market.

The report also notes that foreign investors, who have been abstaining from buying U.S. stocks since February, may return to the market. If the dollar stabilizes, these foreign investors could bring in an additional 500 billion to 1000 billion dollars in the second half of the year, further boosting the market.

The report emphasizes that the recent slowdown in retail buying in May and June is not a cause for concern. This slowdown is attributed to retail investors taking profits after significant gains in March and April, particularly in leveraged ETFs. The report expects retail investors to resume buying starting in July, providing continued support to the market.

In summary, the forecast of 5000 billion dollars flowing into the U.S. stock market in the second half of the year is primarily driven by retail investors. While institutional investors have limited room for further increases, the potential buying power of retail investors and other funds is expected to offset selling pressures and drive the market higher. Additionally, a stabilization of the dollar could bring in further foreign investment, providing additional support to the market.