JP Morgan (NYSE:JPM) Expects Correction is Near

Last week, the market experienced an abrupt sell off. However, the market stabilized on August 4, when the investors gained their confidence back. European stocks were able to gain slightly whereas the US stocks pointed to a positive future.

Standard and Poor’s 500 as well as Stoxx Europe 600 gained around 0.3 percent in the middle of European session. This stabilization was seen after a shaky week when the Standard and Poor’s 500 saw a huge decline. In fact the S&P figures saw such a decline for the first time in the last two years. European benchmarks also saw a decrease during the last week.

According to the researchers, this decline cannot be associated to any one reason; rather it is a result of many different negative news and rumors. The news of U.S Federal reserve increasing the interest rates and the Ukraine conflict with Russia have both contributed to the market fall down. Moreover, the engulfing of Banco Espirito Santo by messy saga can also be pinpointed as a cause of market slowdown.

UBS Global Asset Management’s chief investment officer for Europe, Gregor Hirt, said that the initial trigger came from the domestic product statistics, which indicated an increase in the interest rates around the U.S. Gregor Hirt further said that the market remains volatile during summers and thus the current situation is nothing but a temporary correction. According to the news, second quarter’s GDP increased by 4 percent. However, UBS global asset management still favors stocks over assets. It is pertinent to note here that the company manages assets that are worth over $674 billion.

Gregor Hirt is of the opinion that the market will remain volatile in the latter part of the year, showing significant declines as soon as the interest rates are in sight. He said that the market fluctuations depend on Federal Reserve’s interest hike. If the rates are not increased until 2015, the market will remain firm for the year 2014.

A lot of investors and traders reported that they were expecting a vibration in the stock and equity market for quite some time; they were not sure about the causes but were confident that the market would slump down in the near future.

A global market analyst at JP Morgan (NYSE:JPM), a financial advisory firm that has around $1.65 trillion assets under management, said that the stock market’s recent decline resulted in a number of traders gaining big chunks of assets.

He further stated that most of these traders will end up losing the assets as the market will fluctuate yet again. Hence, it is better to sell the stocks, even those ones that are expected to climb up. The analyst said that the equity allocation has gone up unexpectedly, due to market fluctuation. It was not meant to go up like this, thus it will come down in a matter of days; it’s better to liquidate the assets before the equity goes down.

Analysts at JP Morgan (NYSE:JPM) are of the view that even the strongest of stocks will have a difficult time as soon as the Fed increases the rates.