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(Bloomberg) -- Signs of stock-market complacency are emerging as the searing equities rally coincides with an acceleration in earnings downgrades, according to JPMorgan Chase & Co. quantitative strategists.

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Stocks have bounced back from April’s slump at an even faster pace than after the Covid pandemic, sending the MSCI World Index and many regional benchmarks to record highs. At the same time, consensus data shows downgrades outpacing upgrades sharply in global earnings revisions, the JPMorgan team led by Khuram Chaudhry said.

“There appears to be an environment of bullish sentiment, speculation, and a growing air of complacency,” they wrote. “Either sell-side analysts are about to start a new round of upward revisions or the market is at risk of suffering a period of increased volatility and draw-downs. Something has to give!”

Net revisions for global earnings have slid 14.3% on a one-month basis and 18.7% over three months. For now, the US shows fewer cuts, thanks to strength in sectors like technology, they said, while regions like Asia and Europe face accelerating earnings-per share downgrades.

Guidance in Europe has been weak, given the uncertainty around tariffs, with a slew of profit warnings, especially in the chemical sector. In the US, expectations are high for the Big Tech names after a 35% surge in the Nasdaq 100 since its April low. Cracks could still emerge in the second half, the analysts said.

“The US market is thriving on sectors like Technology and the ‘Magnificent 7’ stocks, fueled by the Generative AI trend,” they wrote. “Yet cracks and volatility are increasingly likely in the second half. Investors should be on the lookout for a potential market rotation!”

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For those expecting looser monetary policy to boost the market, the three to four cuts priced in over the coming 12 months shouldn’t be taken as a positive, Chaudhry and his team said.

“Any forthcoming interest rate cuts may signal underlying weakness, rather than a build up in positive sentiment.”