Market is at ‘peak of Hawkishness’ and investors should buy, says JPMorgan

  • JPMorgan’s Marko Kolanovic remains optimistic even as markets plunge, saying on Monday he remains “pro-risk”.
  • He said central banks have likely hit a “peak of hawkishness” as the Fed avoids a 75 basis point rate hike.
  • The bank’s top strategist said investors should stick to stocks and recommended buying corporate bonds.

JPMorgan’s top strategist Marco Kolanovic is sticking to his bullish guns, saying central banks have reached the “peak of aggressiveness” and advising investors to buy risky assets.

Despite the continued decline in stocks and bonds, Kolanovic said he remains “pro-risk” and still committed to stocks. “Last week’s sell-off seems overdone,” he said in a note Monday.

Stocks fell in 2022 as the


Federal Reserve

possesses rising interest rates to fight soaring inflation, forcing investors to shy away from stocks that looked more attractive when borrowing costs were at their lowest.

The rout has deepened 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 accommodative Fed policy, also fell dramatically.

Nonetheless, Kolanovic advised investors to buy risky assets to take advantage of what he sees as an overly pessimistic market.

The strategist argued that central banks are likely to be less “hawkish” – or eager to raise interest rates – than many investors think, given the uncertain state of the economy.

He pointed to Fed Chairman Jerome Powell saying the central bank was not planning 75 basis point rate hikes and the Bank of England was signaling the risk of


recession

.

Kolanovic specifically recommended investors buy corporate bonds, which fell sharply along with stocks and government bonds.

“We are increasing the


corporate bond

allocation in our long only portfolio by 4%, and fund this increase through equal reductions in cash and government bond allocations,” Kolanovic said.

Kolanovic’s optimism hasn’t paid off so far this year, however. He repeatedly told investors to buy stocks, but stocks 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 called the last two major bear markets explains why he moved virtually all of his cash positions. He shares what he wants to see before he redeems

Carol N. Valencia