- JPMorgan sees growing risks of a late-summer or early-autumn market downturn despite major indexes remaining in bullish trends.
- The bank points to weakening market internals, defensive rotation, and fading conviction in AI stocks.
- Strategist Jason Hunter sees similarities between today's AI trade and the 1999-2000 tech boom, raising concerns about crowded technology exposure.
Fragile Prospects
Even as major indexes stay bid, JPMorgan cautions that risks of a late-summer or early-autumn selloff are rising. The bank's strategists, led by Jason Hunter, point to weakening market internals, a rotation into defensive sectors, and increasingly crowded exposure to artificial intelligence stocks. Hunter draws parallels between the current AI rally and the late-1990s tech boom, warning that leverage and herding could amplify any downturn if momentum fades.
The warning comes amid a backdrop of rising Treasury yields, elevated Middle East tensions, and softer consumer spending—factors that add to the downside risk. While the major indices remain in bullish trends, internal risk signals suggest that volatility could spike in the coming months. Some market participants see the AI-related weakness as potential fuel for wider market volatility, especially if investors unwind leveraged positions.
"The market is showing signs of fragility beneath the surface," said one strategist familiar with JPMorgan's thinking. "We're advising clients to consider hedging strategies." A spokesperson for JPMorgan declined to comment further.
As the summer progresses, all eyes will be on whether the AI trade can sustain its momentum or if the echoes of 2000 will prove prophetic. For now, the bank's cautionary note serves as a reminder that even in bullish times, risks lurk.
This article was updated to clarify the role of Jason Hunter.