According to Bloomberg News, a strong bull in US equities, Mark Kolanovic is dialing back on the year’s selloff after the market staged a recovery that was powerful enough.
It’s time to cash out on stocks
The highly ranked strategist of JP Morgan Chase & Co said that those investors who followed his team’s advice to increase stock holdings must now take profit and migrate some cash to the government bonds since the big selloff in asset classes.
As per a note written by Kolanovic, markets are showing recovery of the majority of the initial selloff that took place at the beginning of March, and they do not appear to be oversold, while the risks continue to remain higher around geopolitics, growth, and policy tightening.
Bloomberg News reports that this is a shift for the strategist that has continuously shown divergence with the Wall Street bears like Mike Wilson of Morgan Stanley, thereby urging the investors to “buy the dip” and invest in stocks. Wilson said on Monday that S&P 500 and bond markets are very much sanguine about the economy’s outlook.
However, despite recent revisions, Kolanovic has continued to suggest holding more stocks and lesser bonds in comparison to the ones indicated by benchmarks to derive benefits from an economic growth that is sustained.
The S&P 500 has traced back to more than half of its losses in January and February. The benchmark index is sitting 6% above the March through, while the rally has stalled in April in April.
Within the equity markets, Kolanovic suggests investors favor the emerging markets. The Federal Reserve is becoming even more aggressive in hiking interest rates to tackle inflation, while China’s central bank is planning to ease out the monetary policy this month.
He also stated that if the rise in bond yield continues, it is likely to become a problem for the equities. However, it is believed that the present yield in real bonds at zero is not high enough to challenge the equities, and any further rise in real yields is less likely for a given low bond position.
