Renowned JPMorgan strategist Marko Kolanovic believes the majority of economic data is already priced in, making him one of the few analysts that remains bullish on the prospects of the stock market for the second half of the year. As opposed to other Wall Street banks, Kolanovic thinks stocks will end 2022 “meaningfully higher.”
Equities to End 2022 “Meaningfully Higher”, Says Kolanovic
Marko Kolanovic, last year’s top-ranked equity strategist, released a note to clients Monday where he voiced his optimism about equities’ outlook for the second half of the year. Kolanovic thinks the worst of economic data is already priced in, and that stocks will end the year significantly higher.
“Although the activity outlook remains challenging, we believe that the risk-reward for equities is looking more attractive as we move through the second half. The phase of bad data being interpreted as good is gaining traction, while the call of peak Federal Reserve hawkishness, peak yields and peak inflation is playing out.”
Kolanovic wrote in a note to clients.
His view contrasts with the opinions of other Wall Street giants including Goldman Sachs and Morgan Stanley, who are significantly more pessimistic about the outlook. Goldman Sachs’ Cecilia Mariotti issued a note Monday saying recession fears aren’t fully priced in equities and added it is too soon to dismiss those risks.
“Looking at the re-pricing of cyclical assets in the US and EU, we think the market might have been too complacent too soon in fading recession risks on expectations of a more accommodative monetary policy stance.”
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S&P 500 Rebounds Ahead of a Critical Period
The stock market has been battered this year amid a challenging macroeconomic environment including red-hot inflation levels, a series of aggressive interest rate hikes, and geopolitical tensions. These factors have weighed on all capital markets in recent months, with the S&P 500 index down almost 15% year-to-date and the crypto market cap falling below the $1 trillion mark earlier this year.
However, U.S. equities have seen a strong rebound in the past month, with the S&P 500recording its best monthly gain in nearly 2 years. The rebound was fueled by expectations that the central bank will slow the pace of rate hikes and stronger-than-expected Q2 corporate earnings results.
But the benchmark stock index has now entered a crucial period, given that August and September have historically been its worst-performing months. Still, Kolanovic remains more bullish on S&P 500 compared to his peers, saying that the rate at which stock multiples shrank is larger than the typical compression in previous recessions.
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About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.