The Chief Market Strategist at J.P. Morgan has warned of a possible 20% drop in the stock market
In an appearance on CNBC’s “Fast Money” on 5 October 2023, J.P. Morgan’s Chief Global Market Strategist and co-head of Global Research Marko Kolanovic discussed his outlook on the market, the Federal Reserve’s stance on interest rates, and the relative success of mega-cap and mid-cap stocks.
New York University Ph.D. holder in theoretical high-energy physics, Kolanovic applies a quantitative perspective to market analysis. Institutional investors throughout the world evaluate his team highly, and he himself is ranked first in Americas Equity Derivatives. He worked at Bear Stearns and Merrill Lynch before joining J.P. Morgan in an executive capacity. He has been called “The Man Who moves Markets” by CNBC and “Gandalf” by Bloomberg for his ability to accurately predict the direction of the market in the short term. When it was established in 2020, he was inducted that year.
Kolanovic started out by saying he is cautiously optimistic about the market. He did not come right out and say a recession is certain, but he did say he believes one is “eventually going to happen.” The potential benefits of investing in equities are outweighed by the risks, he said.
While Kolanovic acknowledged the robust state of the employment market, he also brought attention to the strain being felt in the consumer sector. Although he did not directly declare that consumer mood is deteriorating, he did hint that they might be early symptoms of economic issues.
Kolanovic spoke on the present interest rate environment, focusing on the ten-year Treasury yield of 4.7 percent. He said that the current interest rates are inconsistent with past market multiples and that they may go up much more. But he didn’t seem too worried about the rates as they are now.
The gap between the NASDAQ and other markets was a topic Kolanovic discussed. Although the NASDAQ and large-cap companies have done well, he pointed out that other markets have been either flat or down. He recommended investing in trailing companies if a recession is not anticipated, and avoiding mega-cap firms otherwise.
According to Kolanovic, market positioning is crucial and has played a major role this year. He pointed out that the recent decline in volatility has been good for the market. However, he did not directly state that more volatility portends worse times ahead.
In a short discussion of different types of assets, Kolanovic mentioned volatility. He said it’s tough to invest just in volatility because of its bad connotation. By selling short-term options, he said, investors may exploit it to produce yield.
