JPM’s Kolanovich says stocks ‘could rise out of this hole’

(Bloomberg) – Marco Kolanovic is adamant that things could get better for US stocks as the year progresses, even as S&P 500 tumbling and bullish catalysts seem rare these days.

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“We can climb out of this hole,” Kolanovich said, referring to the stock price in an interview at his New York office last week. “There will be no recession this year, with some summer surge in consumer activity behind reopening, China is tightening its financial and monetary system.”

Strengthening his view is a conviction that US inflation has probably reached the peak, or is about to do so, paving the way for a pullback in price pressures that will ultimately allow the Federal Reserve to moderate the pace of fiscal austerity. Fed Chair Jerome Powell, in his most scathing remarks to date, said Tuesday that the US Federal Reserve will continue to raise interest rates until there is “clear and credible” evidence that inflation is receding.

Americans had a slight respite from inflation in April, as prices of various essentials and discretionary spending continued to rise at some of the fastest rates. While annual consumer price measurements have cooled somewhat since March – indicating a peak that economists had hoped for – the details of a report last week still paint a worrying picture as monthly figures outperform forecasts.

“Most bad things have already happened this year,” Kolanovic said. These include “the Fed has taken a very sharp turn and is moving very aggressively towards tightening ৷ and then the war in Europe, which we would say is affecting commodity inflation for consumers, especially in Europe. And then China again, we are somewhat optimistic that China will stabilize their economy.” Will do and will stimulate more quickly and they will not go through significant lockdown again. “

Kolanovich, one of the most closely watched strategists on Wall Street, was promoted to his current role with Hussein Malik in September. JPMorgan has been named the leading global research organization and the number one equity research team, according to the results of a survey of institutional investors published in January, already after being awarded the number one Global Fixed Income Research Team.

Although strategists such as Kolanovic and Kate Moore of BlackRock Inc. suggest that fears of an impending recession are over-expressed, investors are raising cash due to stagflation concerns, according to a recent Bank of America Corporation fund manager survey.

Kolanovich maintains a bullish outlook even as stocks decline. In the last few weeks alone, he has spoken out in favor of adding a risk to the top Hawkins, saying markets are adding value to the prospect of a recession. In mid-March, he said the market correction was almost done, after saying in February that bond traders were paying extra to a Hawkeye Fed.

Kolanovic commented on Friday that the S&P 500 rose 2.4% to close at 3,930.08 on May 12. It closed at 3,923.68 on Wednesday. He was not immediately available for comment after the drop, although he said in an interview that he was taking a long-term view.

U.S. equities posted their worst route since Wednesday, June 2020, as investors assessed the impact of higher prices on earnings and monetary policy tightness on economic growth. The slide extends this year’s selloff in the S&P 500 to about 18%.

For specific levels of benchmarks that will attract interest, Kolanovich says now is not the time for broad-brush strategies because gauges like the S&P 500 have some expensive stocks and some are cheap. He sees significant opportunities for innovation, biotechnology and international growth, but advises to stay away from defense companies like dividend-payers and Staples – which in his view are expensive.

“Where do I buy S&P?” I almost refuse to talk about it, “he said.

(Paragraph 9 adds a discussion of market dynamics.)

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