(Bloomberg) — Marko Kolanovic, strategist at JPMorgan Chase & Co. said he is “turning more defensive,” recommending that investors limit the stock’s rally this year as “a recession is not currently priced in in the stock market.”
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Kolanovic, one of the most bullish on Wall Street through much of last year’s market sell-off before changing his stance in recent months, has bolstered the portfolio’s defensive bias. the bank’s model this month by including government bonds in an “underweight” state and a slight “overweight” status, while reducing risk on equities, credit and commodities. chemical.
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“With equities trading near last summer’s highs and at above-average multiples, despite weak earnings and strong interest rates recently, we think the market is overvalued. high on recent good news on inflation and complacency in risk,” a group of strategists led by Kolanovic wrote on Monday.
Kolanovic warned that a recession would be “eventually necessary” to bring inflation back to central bank targets and said the growth potential of markets could be “quite limited”, as prolonged pricing and high interest rates. He pointed to US industrial stocks and European stocks, arguing that the recession was not priced in as each group was essentially flat over the past year.
Most of Kolanovic’s 2022 calls were unsuccessful. He has since reversed his stance, cutting equity allocations in mid-December due to a weak economic outlook for this year. In January, he said the economy was heading for a recession and the bank had reduced its recommended equity allocation again due to recession fears and central bank tightening. Last week, he said the US economy’s de-inflation might be “temporary”.
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However, Kolanovic urged investors to buy down Chinese stocks during the recession in October, a call he was correct as the MSCI China Index has rallied more than 20% since the start of the month. 10. He said the bank continues to tilt its portfolio to “benefit from headwinds from China’s reopening,” with an “overweight” on commodities, mainly through energy and emerging market stocks.
“We think one should use ytd returns to cut equity allocation and reduce portfolio beta,” Kolanovic writes. “We believe international stocks (China/EM, Japan and Europe) offer better risk rewards than US stocks.”
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