The US stock market hits new highs but long and short positions are in fierce confrontation: JP Morgan is bearish on non-farm employment data, while Morgan Stanley firmly believes that the expectation of interest rate cuts will continue the bull market.

The latest analysis from JPMorgan's strategy team suggests that the slowdown in the US labor market could have a greater suppressing effect on the stock market than the boosting effect of the Federal Reserve's interest rate cuts, which could completely offset the positive impact of the Fed's monetary easing policy. The team led by chief strategist Misla Matika believes that the macro environment supporting the US stock market is weakening, and while the Fed may start a rate-cutting cycle due to soft employment data and inflation pressures from tariffs, the impact of a weakening job market on investor confidence will be more significant. The team emphasizes in its research report: "The negative effects of a weak labor market will be more dominant than the positive momentum from the Fed's monetary policy easing." Market focus is now on the series of employment data to be released this week, including reports on job vacancies and nonfarm payrolls, as investors try to capture substantial signals of the US economic recovery. Current trader expectations show that the likelihood of the Fed implementing at least two rate cuts by the end of the year has been fully priced in, while the possibility of a third rate cut has led to a standoff between bulls and bears. In contrast, Morgan Stanley's strategy team, led by Michael Wilson, holds a different view. The firm believes that the market is likely to rebound before the rate cut expectations are met. According to Morgan Stanley economists, the Fed is expected to cut rates a total of seven times by 2026, which will provide crucial support for the stock market performance in the second half of this year. Their strategy report states: "Although the positive effects of rate cuts may be digested early and lead to short-term volatility, historically, the stock market tends to continue its strong performance once the Fed officially enters a rate-cutting cycle." Last week, both the S&P 500 and Nasdaq Composite indexes closed at historic highs, rising by about 3.5% and 4.1% respectively. Behind the clash of opinions between the two major investment banks is a difference in judgment on the turning point of the US economy. JPMorgan focuses on the chain reaction of the deterioration in the job market on consumer demand and corporate profits, while Morgan Stanley is more concerned with the driving force of policy shifts on valuation expansion. The current market is at a sensitive point in a data vacuum period, and the upcoming employment indicators will be the key litmus test to verify both sides' logic, potentially reshaping investors' expectations of the Fed's policy path and economic outlook.