The stock market has been under pressure since the inflation report for August came in surprisingly strong last week, but JPMorgan Chase & Co.’s chief market strategist Marko Kolanovic doesn’t see this year’s drop getting much uglier despite a hawkish Federal Reserve.
Investors have been bracing for a jumbo rate hike from the Fed on Wednesday, the day central bank Chair Jerome Powell will hold a press conference on its latest policy decision as it battles high inflation. The S&P 500 is already down around 18% so far this year amid concern over rising interest rates and the persistently high cost of living in the U.S.
Kolanovic acknowledges the weight of rising real yields and higher expectations for the Fed’s terminal rate on the market. While an earnings decline could become more significant if the unemployment rate begins moving “materially” higher and the U.S. falls into a deep or protracted recession, Kolanovic sees a potential backstop in the stock market.
“In other words, retail investors have shifted back to end-2020 levels in terms of their equity allocation,” he said. Meanwhile, “institutional investors’ equity positions are also low,” he wrote, as indicated by “equity futures positions proxies” as well as “persistently low demand for hedging.”
TFMkts 2/ has no rel to the econony & as the Fed was lagging in raising, it will lag in pausing but the front running crim in this Ind BS masses by shwng only partial info😀if the Fed were to follow these dumb deflationists, we will face the biggest crisis in few weeks
TFMkts 1/ One would expect that zombies wud learn by now,😀😇the whole narrative is to run up another giant squeeze😀on dumb shorts & put buyers😀other than a few stk splits, there is no lqdty & the crim ind is riding on this, squeezing illiquid mkt😀into perennial squeeze😀mkt😀😇