By Senad Karaahmetovic

Analysts at JPMorgan, reiterated their cautious stance on U.S. equities as they believe the market is too optimistic at the moment.

gained yesterday to print fresh multi-week highs with the benchmark U.S. stock market index now up 7.4% year-to-date (YTD). This is despite a rising environment, a major banking crisis, an oil shock, and a declining .

All these factors are “not good for risk,” the analysts told JPMorgan's clients in a note.

“For a rational investor, we think this makes little sense and that most of the inflows over the past 2 weeks were driven by systematic investors, short squeeze and a decline in . Any decline in yields is not a sign that the Fed is about to bring a punch bowl for tech stocks, in our view, but rather a sign that recession probability has increased,” they wrote.

JPMorgan believes the U.S. entering a recession in the next 12 months “should be a baseline.” Along these lines, the analysts say the risk sentiment will turn negative, ultimately pushing the market towards last year’s lows “over the coming months.”

In this type of environment, investors should be underweight stocks and favor Defensives vs Cyclicals.

“We maintain a bullish stance on International markets vs the US, while China could have a second leg of performance, at least in relative terms. We believe investors should add to bond proxies and go UW Value style. Staples should trade better in 2H, and investors should add to them by reducing Autos & Mining,” they concluded.