JP Morgan’s Kolanovic sticks to his guns, still overweight stocks

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It’s not yet time to throw in the towel on stocks or commodities, according to JP Morgan’s global market strategist Marko Kolanovic.

“We stay pro-risk, with OWs in equities and commodities and UWs in bonds and cash,” he wrote in a note. “The past week’s sell-off appears overdone, and driven to a large extent by technical flows, fear, and poor market liquidity, rather than fundamental developments.”

Kolanovic gained attention for several buy-the-dip calls and has remained positive on equities through the sharp drawdowns in the major averages.

Year to date, the S&P (SP500) (NYSEARCA: SPY) is down 16%, the Nasdaq 100 (NDX) (QQQ) is off 25% and the Dow (DJI) (DIA) is 11% lower.

“While we expect growth to soften, we continue to push back on a base case assumption that the global economy is headed for recession, an outcome that is increasingly being priced by markets,” he said. “We see supports for our pro-risk stance from COVID reopening, policy easing in China, strong labor markets, light positioning, distraught investor sentiment, and healthy consumer and corporate balance sheets.”

Central banks also look like they have reached peak hawkishness, he added.

In stocks, the team still recommends a barbell portfolio of growth and value.

“Value stocks have growing earnings and stronger balance sheets, thus scoring well for both Growth and Quality, respectively. And conversely, many Growth stocks have cheapened to the point where they score well as Value.”

The bullish view is in contrast to HSBC, which came out today recommending avoiding risk assets.

“The performance across asset classes of the past few weeks can be described in one word: brutal,” HSBC said, according to Bloomberg. “Our view remains firmly risk-off. Pretty much all of our fundamental and cyclical indicators clearly point to a growth scare coming – not in 2023, but in the next 3-6 months.”

Stocks tanked yesterday, with the S&P losing the 4K level and the Nasdaq dropping 4%.

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