JPMorgan’s Marko Kolanovic is bracing for a 20% decline in the S&P 500 index.
According to the Institutional Investor Hall of Famer, high interest rates have created a breaking point for stocks, and choosing cash with a 5.5% return in money markets and short-term government bonds is now an important protection strategy. It is said that it has become.
“I don’t know how to avoid it. [recession] If we keep rates at this level,” the firm’s chief market strategist and co-head of global research told CNBC’s “Fast Money” on Thursday.
The S&P 500 closed Thursday at 4,258.19, on the brink of a five-week losing streak. The index has fallen more than 5% in the past month.
Kolanovich believes that this weakness is not a strong sign that the monster will move to the lower ranks. He suggested that a near-term recovery was still possible, with much dependent on economic reports in the coming months.
”[We’re] “I’m not necessarily calling for a steep drop right away,” he said. “Could stocks go up another 5, 6, 7 percent?” Of course…but there are also drawbacks. There is a possibility of a 20% decrease. ”
He said the “Magnificent Seven” stocks, which include Apple, Amazon, Meta, Alphabet, Nvidia, Tesla and Microsoft, are among the most vulnerable to significant losses due to their historic rally amid high interest rates. It warns that it is. The group is up 83% so far this year, accounting for most of the S&P 500’s gains.
“If there was a recession, I think it would be great.” [seven]… We will catch up with the rest,” Kolanovic said, citing hard-hit sectors such as consumer staples and utilities.
Additionally, Kolanovic believes that the economic context has left consumers dangerously strapped for cash.
“The job market is still strong, but the stress is starting to be felt. [the] Looking at the status of consumer delinquency, [credit] “We’re still seeing a bit of a negative picture” on credit cards and auto loans, he said.
Kolanovich, a top equity strategist at Institutional Investors, entered the year with a year-end target for the S&P 500 of 4,200. The index ended 2022 at 3,839.50.
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