The backdrop for stock markets right now is "as good as it gets" and potential problems lie ahead for the coming summer months, JPMorgan has warned.
June saw the S&P 500 gain over 3%, hitting new all-time highs, up 15% since the start of the year.
However, the equal-weighted version of the index, where all companies' shares have an equal weight rather than being heavily tilted towards the megcaps at the top end, has stalled since March.
So far this year, the equal-weighted SPW index is 10% the headline S&P 500 benchmark so far this year.
"We think this is reflecting a changing growth-policy narrative versus early 2024," JPMorgan equity strategists said in a note to clients.
So while at the start of the year, investor expectations were for a Goldilocks outcome of accelerating economic growth and the Federal Reserve starting policy easing in March.
Instead, US activity momentum is slowing, with the Fed now expected to begin easing towards the very end of the year.
"Instead of easing pre-emptively for the market-friendly reasons, such as falling inflation, as was the view at the start of the year, Fed could look like they are falling behind the curve.
"At the same time, there is no safety net anymore, the market is positioned long, VIX is at lows, potentially underpricing risks and credit spreads are extremely tight - this is as good as it gets."
If a strengthening US dollar is added to the picture, something that has typically had an inverse correlation with risk assets like stocks, and elevated political uncertainty, "we arrive at a problematic setup for the equity market during summer", the investment bank said.
Stocks have seen a rotation into more defensive sectors in the second quarter compared to the first, JPMorgan thinks this will continue.