JPMorgan Chase & Co. strategists are saying they see tentative signs that inflation volatility is peaking, as they note that stock markets are exhibiting one sign which could point to bullishness.

JPMorgan Chase & Co strategists, led by Nikolaos Panigirtzoglou, wrote in a note that as fears of tightening monetary policy and a potential recession have roiled stock markets this year, the put to call open interest of S&P 500 options collapsed, due to demand for hedging subsiding.

“This reduced demand for hedging equity risk is a bullish signal as it likely reflects low equity positioning by investors,” the team said. “There are some tentative signs that inflation volatility could be peaking, which would be consistent with markets continuing to look through the spike.”

They go on to say that this implies an upside for the S&P 500 of about 7% in the second quarter, with a fair value of 4400 index points. If they assume that markets begin to factor in a rise in inflation volatility as an adverse model, the fair value falls to 3,350 points.

This analysis comes just weeks after the S&P 500 skirted a bear market and right as the Federal Reserve is beginning a policy of monetary tightening, leaving investors concerned about the economy possibly turning toward a recession amid rising fuel costs and growing inflation. So far a jump in bond yields above the key 3% level has kept risk demand subdued.

Analysts are split on whether the Stock Market has found its bottom. Morgan Stanley’s Michael Wilson forecasts another 17% downside for the S&P 500 from its latest close. Meanwhile, JPMorgan strategists, including Mislav Matejka reiterated a bullish outlook, saying “the fundamental risk-reward for equities is likely improving as we approach the second half of the year.”

At the end of the day, it is entirely possible factors even beyond any of these, such as a quick end to the war in Ukraine will be the factor which tips the balance, and determines the course forward for months, and maybe years to come.