Kolanovic sees the first three months of the year likely marking an “inflection point in the market,” with an air pocket during the second and third quarters. — Bloomberg
NEW YORK: JPMorgan Chase & Co strategist Marko Kolanovic has reiterated that investors should fade last week’s Federal Reserve (Fed)-induced stock market rally, arguing that the US economy’s disinflationary process could just be “transitory”.
Kolanovic saw the first three months of the year likely marking an “inflection point in the market,” with an air pocket during the second and third quarters, he wrote in a note to clients.
That will be followed by renewed deterioration in fundamentals through the end of the year since the central bank will likely keep interest rates high for some time, he added.
“We advise to use the current strength in order to reduce exposure,” a team of strategists led by Kolanovic wrote, pointing to how investors piled back into speculative assets from crypto to meme stocks.
A strong labour market could be a dose of cold water for a “soft landing” scenario, where the Fed tames inflation while the economy continues to grow. If that doesn’t come into fruition, it will result in a mean-reversion across this year’s equity winners, according to Kolanovic.
After a surge in payroll growth raised concern that speculation about a Fed pivot was premature, Kolanovic now expects two more rate hikes in March and May, each by a quarter percentage point. — Bloomberg
