JPMorgan's Kolanovic 'Remains Positive on Risky Assets'

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By Sam Boughedda

JPMorgan market strategist Marko Kolanovic, said the firm remains positive on risky assets due to near-record-low positioning, bearish sentiment, and their view that "there will be no recession given supports from US consumers, global post-COVID reopening, and China stimulus and recovery."

In a note to clients on Wednesday, the analyst acknowledged that the war in Ukraine is a "significant risk" for the cycle but will likely result in a settled solution in the second half of the year.

"Despite the steep selloff, we believe that markets will recover YTD losses and result in a broadly unchanged year. This is now an out of consensus 'bullish' view, with most strategists now negative," wrote Kolanovic.

Speaking on May's market moves, the analyst said the first half of the month saw the market "driven by shorting selling and negative feedback loops post-Fed."

However, as it moved into oversold conditions, "it didn’t take much to completely reverse losses - there were measured comments from the Fed (Bostic), and management of financial institutions giving hope that a policy error and recession may be avoided."

He noted that the market has already absorbed and priced in the change in monetary policy and significant tightening of financial conditions, while he believes inflation has peaked or is peaking now.

"Corporate buybacks kicked in post earnings (and will persist for the year at a record level of $1.2Tr annualized) and fixed weight portfolio rebalances in the last week of the month...Of course, some shorts were also forced to close, producing the strongest rally since 2020. We believe that this will be a template for the whole year, in the sense that the market sold off in the first half of the year and will be followed by a gradual recovery in the second half," wrote Kolanovic.