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JPMorgan’s Marko Kolanovic sees three reasons for more stocks upside

If anything, there is “too much negativity rather than too much complacency in markets,” Kolanovic and his team wrote in a note to clients, sticking with a pro-risk stance. They cite three reasons for their optimistic outlook:

March 30, 2022 / 06:37 AM IST
Source: Reuters

Source: Reuters

Equities can continue rising even as the hawkish Federal Reserve and Treasury yield curve inversion spook investors, according to JPMorgan Chase & Co.’s strategist Marko Kolanovic.

If anything, there is “too much negativity rather than too much complacency in markets,” Kolanovic and his team wrote in a note to clients, sticking with a pro-risk stance. They cite three reasons for their optimistic outlook:



  • Both equity and credit markets have historically fared well at the start of monetary tightening cycles

  • Even as nominal bond yields and rates rise, “the real policy rate is extremely negative and thus simulative” and it’s too early to take inversion as a signal of recession risk

  • Not all central banks are tightening, as the Bank of Japan and People’s Bank of China are moving in the opposite direction, and equities “look likely to see some support from fiscal stimulus” in those countries

Stock markets on both sides of the Atlantic have quickly recovered from the selloff triggered by Russia’s invasion of Ukraine, paring this year’s losses. Even as a spike in commodity prices and an inversion in parts of the U.S. treasury yield curve have raised concerns that an economic slowdown is imminent, the rout has mostly affected bond markets, with equities so far shrugging off recession risks.

The resilience has taken some equity strategists by surprise, while Morgan Stanley’s Michael Wilson and Bank of America Corp.’s Michael Hartnett have urged investors to seek opportunities to sell the rally. JPMorgan’s team disagrees, saying that economic indicators are so far beating expectations and that it’s too early to position for a recession.