Marko Kolanovic is JPM's chief global markets strategist. He says that much of the rally in U.S. stocks since the beginning of 2023 has been driven by "irrational" factors like short-covering and systematic inflows:
- Kolanovic recommends JPM clients keep equity allocation underweight, & overweight in cash
- stay overweight Japanese stocks
Citing:
- "On the downside, even a mild recession would warrant retesting the previous lows and result in 15%+ downside"
- “Even in an optimistic scenario of soft landing (which even the Fed deems unlikely based on the March Board staff forecasts), equity upside is likely less than 5% and that is the return that is delivered by short-term fixed income.”
- "Short-term fixed income provides not only full protection on the downside but also optionality to buy risky asset classes should this pullback happen"
