© Reuters. JPMorgan’s Kolanovic ‘stays positive on risky assets’
By Sam Boughedda
JPMorgan market strategist Marko Kolanovic said the company remains positive on risky assets due to near-record positioning, bearish sentiment and their view that “there won’t be a recession.” given US consumer support, post-COVID global reopening, and China stimulation and recovery.”
In a note to clients on Wednesday, the analyst acknowledged that the war in Ukraine is a “significant risk” to the cycle but will likely lead to a definitive solution in the second half.
“Despite the strong sell-off, we believe markets will recoup year-to-date losses and result in a broadly flat year. This is now an off-consensus ‘bullish’ view, with most strategists being now negative,” Kolanovic wrote.
Speaking on market movements in May, the analyst said the first half of the month saw the market “driven by short selling and negative post-Fed feedback loops.”
However, as it entered oversold conditions, “it didn’t take much to fully reverse the losses – there was measured commentary from the Fed (Bostic) and financial institution management giving the hope that a policy error and a recession could be averted”.
He noted that the market has already absorbed and priced in the change in monetary policy and the significant tightening of financial conditions, as he believes inflation has peaked or is peaking.
“Corporate buyouts began after earnings (and will persist for the year at a record high of $1.2 billion annualized) and fixed-weight portfolio rebalances in the last week of the month… Of course, some shorts were also forced to close, producing the strongest rally since 2020. We believe this will be a pattern for the whole year, in the sense that the market sold off in the first half and will be followed of a gradual recovery in the second half,” Kolanovic wrote.