With an unemployment rate of 3.5% as of the latest jobs report, the US labor market appears to be doing just fine.
But there may be a problem in the background.
Banking giant JPMorgan points out that jobless claims recently rose 10% above the previous three-month average. And every time in history that has happened, the economy eventually went into recession.
“There have been no false positives with this index,” bank analyst Mislav Matejka says in a note to investors. “Unlike the shape of the yield curve or the money supply, which are leading indicators, this is more symptomatic.”
But here’s the good news for investors: JPMorgan says that every time that index falls, the S&P 500 returns an average of 11% over the next 12 months.
With that in mind, here’s a look at three stocks that JPMorgan finds particularly attractive right now.
No one who spends $1,600 on a fully equipped iPhone 13 Pro Max would call that a steal. However, consumers love Apple products.
Earlier last year, management revealed that the company’s active hardware installed base has surpassed 1.65 billion devices, including over 1 billion iPhones.
While competitors offer cheaper devices, millions of users don’t want to live outside the Apple ecosystem. The ecosystem acts as a financial moat, allowing the company to make outsized profits.
It also means that as inflation soars, Apple can pass on higher costs to its global consumer base without worrying too much about falling sales volumes.
Apple will host an event on September 7 — many expect the company to unveil the iPhone 14 lineup then.
JPMorgan analyst Samik Chatterjee has an “overweight” rating on Apple and a price target of $200 — about 26% above current levels.
As a leading graphics card designer, Nvidia stock has had a solid run over the past decade. But that rally came to an abrupt end in November 2021. Since hitting a high of $346 in late November, the stock has fallen more than 55%.
Nvidia’s plunge is significant even compared to other falling stocks in the semiconductor sector.
Nvidia’s business is still on track, making it a particularly interesting contrarian idea. The chipmaker generated revenue of $6.70 billion in its fiscal quarter. The amount represented a 3% year-on-year increase.
Data center revenue rose 61% year over year to $3.81 billion.
JPMorgan analyst Harlan Sur recently cut his price target on Nvidia from $230 to $220. However, Sur maintained an “overweight” rating on the shares and the new price target still implies a potential upside of 46%.
Many consider big data to be the next big thing. And that’s where Snowflake shines.
Founded in 2012, the cloud-based data storage company serves thousands of customers across a wide range of industries, including 506 of the 2021 Forbes Global 2000.
Momentum is strong in Snowflake’s business. In the quarter ended July 31, revenue rose 83% year over year to $497.2 million. In particular, the net income retention rate reached a stable 171%.
The company continued to score major client wins. It now has 246 customers with trailing 12-month product revenue of more than $1 million, compared with 116 such customers a year ago.
JPMorgan analyst Mark Murphy has an “overweight” rating on Snowflake and recently raised his price target to $210 — about 16% above where the stock sits today.
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