JPMorgan's Kolanovic says the market has reached 'peak hawkishness' and investors should snap up risky assets




Wall Street stocks financial markets
Wall Street stocks financial markets  
  • JPMorgan's Marko Kolanovic is staying bullish even as markets plunge, saying Monday he remains "pro-risk."

  • He said central banks have likely reached "peak hawkishness" as the Fed shies away from a 75-basis-point rate hike.

  • The bank's top strategist said investors should stick to equities and recommended buying corporate bonds.

JPMorgan's top strategist Marco Kolanovic is sticking to his bullish guns, saying central banks have reached "peak hawkishness" and recommending investors buy up risky assets.

Despite the ongoing slide in stocks and bonds, Kolanovic said he's remaining "pro-risk" and is still committed to equities. "The past week's sell-off appears overdone," he said in a note Monday.

Stocks have tumbled in 2022 as the Federal Reserve has hiked interest rates to tackle surging inflation, causing investors to turn away from shares that looked more attractive when borrowing costs were at rock bottom.

The rout has worsened in recent days, with the S&P 500 falling 3.2% on Monday to take its losses to more than 16% this year. Bonds, boosted by years of easy Fed policy, have also dropped dramatically.

Nonetheless, Kolanovic recommended investors buy risky assets to benefit from what he believes is an overly pessimistic market.

The strategist argued that central banks are likely to be less "hawkish" - or keen to raise interest rates - than many investors expect, given the uncertain state of the economy.

He pointed to Fed Chair Jerome Powell saying the central bank is not weighing up 75-basis-point rate increases, and the Bank of England flagging the risk of recession.

Kolanovic specifically recommended investors purchase corporate bonds, which have fallen sharply along with stocks and government bonds.

"We increase the corporate bond allocation in our long only portfolio by 4%, and fund this increase by equal reductions in allocations to cash and government bonds," Kolanovic said.

Kolanovic's optimism has failed to pay off so far this year, however. He has repeatedly told investors to buy stocks, but equities have continued to fall, with Russia's invasion of Ukraine also clouding the outlook.

Read more: The boss of a $2.2 billion asset manager who's called the last two big bear markets lays out why he's moved virtually all his positions into cash. He shares what he wants to see before buying back in

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