JPMorgan’s Marko Kolanovic is bracing for a 20% sell-off to strike the S&P 500.
According to the Institutional Investor hall-of-famer, high rates of interest are developing a snapping point for stocks– and selecting money at a 5.5% return in cash market and short-term Treasurys is a crucial defense method today.
“I’m uncertain how we’re going to prevent it [recession] if we remain at this level of rates of interest,” the company’s primary market strategist and worldwide research study co-head informed CNBC’s “Fast Money” onThursday
The S&P 500 closed at 4,25819 on Thursday and is on the cusp of a five-week losing streak. The index is down more than 5% over the previous month.
Kolanovic thinks the weak point isn’t a strong indication a beast relocation lower is currently here. He shows a near-term bounce is still possible since a lot depends upon financial reports over the next couple of months.
“[We’re] not always requiring an instant sharp pullback,” he stated. “Could there be another five, six, seven percent upside in equities? Of course… But there’s a downside. It could be 20% downside.”
He cautions the “Magnificent Seven” stocks, that includes Apple, Amazon, Meta, Alphabet, Nvidia, Tesla and Microsoft, are amongst the most susceptible to high losses due to their historical gains amidst high rates. The group is up 83% up until now this year– bring the bulk of the S&P 500’s gains.
“If there’s an economic crisis, I believe the splendid [seven] … will capture down where the rest is,” stated Kolanovic, pointing out beaten-up sectors consisting of customer staples and energies
Plus, Kolanovic thinks customers are getting alarmingly money strapped due to the financial background.
“The task market is still strong. But you are beginning to see the tension in [the] customer if you take a look at sort of the delinquencies in the [credit] cards and automobile loans,” he kept in mind. “We remain somewhat negative still.”
Kolanovic, Institutional Investor’s top-ranked equity strategist, entered into the year with an S&P 500 year-end target of 4,200 The index closed 2022 at 3,83950
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