3 reasons why the stock market has been incredibly resilient in the face of an aggressive Fed, according to JPMorgan

• There has been remarkable resilience in the stock market despite soaring interest rates and stalling earnings growth.
• Excess cash savings and a solid credit market have helped prop up the stock market, according to JPMorgan.
• These are the three reasons why the stock market has been so resilient despite an aggressive Fed.

From soaring interest rates to fears of a recession and a decline in corporate earnings growth, a lot has been thrown at the stock market over the past year.

And yet, stocks and other risk assets have held up quiet well, all things considered. While the S&P 500 is nearly 20% below its record high, it's at the same level it was 10 months ago when interest rates were significantly lower than they are today.

"A 240 basis point increase in peak Fed pricing and a 100 basis point increase in the 10-year US Treasury yield since then had little overall impact in US equity prices," JPMorgan said in a Wednesday note.

According to the bank, there are three key reasons why stocks and other risk assets have been so resilient in the face of macro factors that would typically send the market reeling — and as long as they hold steady, so too can stocks.

1. Credit stress has been contained

"Borrowers who had fixed rates before 2022 have been rather immune to interest rate increases," JPMorgan said.

For more than a decade, consumers were able to take advantage of near-zero interest rates and score 30-year fixed mortgages at less than 4%, while businesses locked in long-term debt at low interest rates.

And while rates have soared over the past year, they are still at historically low levels, JPMorgan highlighted.

"Even if we assume current yield levels represent a 'new normal' it will likely take till the end of the decade for the entire decline in interest rate payments relative to GDP in the post 2008 financial crisis period to be reversed," JPMorgan said.

2. Excess cash in the financial system

There is still a ton of excess cash sitting in consumers' bank accounts and money market funds, to the tune of trillions of dollars. In fact, there's a record $1.2 trillion sitting in money market funds held by retail investors, as they take advantage of higher interest rates.

"The stock of cash or M2 money supply in non-bank investors' financial assets remains slightly above its post Lehman period average, continuing to provide background support to bonds and equities," JPMorgan said.

3. Headroom in the equity risk premium

The equity risk premium is the excess return earned in the stock market relative to the risk-free rate. When interest rates rise, the equity risk premium shrinks and creates a greater hurdle for the stock market to generate excess returns. But given current rates and inflation, there is still enough premium where it makes sense to invest in stocks.

"Compared to the previous equity cycle peaks in 1999 and 2007 Equity Risk Premia either vs. cash or bond yields still have room before they reach excessively low levels," JPMorgan said.