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JPMorgan's top equity guru says buy more government bonds, avoid stocks as a recession looms at the turn of the year

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Marko Kolanovic continues to see a year-end recession in his base case and says investors should prepare for risk ahead.

Investors should buy more government bonds to brace for the likelihood of a recession hitting later this year, JPMorgan's top equity strategist says. Investors are increasingly deserting defensive positions as more market participants expect a soft landing scenario for the economy. This comes on the heels of a strong start to the year, with the Nasdaq Composite climbing more than 30%, notching its best first half since 1983.

"This benign and complacent pricing of recession risk, along with increasing signs that a credit cycle is emerging, makes us turn more negative on corporate bonds and more positive on government bonds," Kolanovic wrote to clients on Monday. "We therefore trim our allocation to credit by shifting two percentage points away from corporate bonds and into government bonds in our model portfolio," Kolanovic wrote.

 

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