Investors should buy with Market at Peak Hawkishness

  • JPMorgan’s Marko Kolanovic remains bullish even as markets tumble, saying on Monday he remains “pro-risk.”
  • He said that central banks have probably reached the “peak hawk” as the Fed backs away from a 75 basis point rate hike.
  • The bank’s chief strategist said investors should stick to stocks and recommended buying corporate bonds.

JPMorgan’s chief strategist Marco Kolanovic sticks to his bullish views, saying central banks have reached “peak hardline” and advising investors to buy risky assets.

Despite the ongoing slide in stocks and bonds, Kolanovic said he remains “pro-risk” and remains committed to equities. “Last week’s sell-off seems exaggerated,” he said in a note Monday.

Stocks have fallen in 2022 as the


Federal Reserve

has raised interest rates to cope with rising inflation, prompting investors to shy away from stocks that looked most attractive when borrowing costs were at their lowest.

The defeat 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, buoyed by years of Fed dovish policy, have also fallen sharply.

However, Kolanovic advised investors to buy risky assets to benefit from what he believes is an overly bearish market.

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

He pointed to Fed Chairman Jerome Powell saying the central bank is not weighing 75 basis point rate hikes, and the Bank of England pointing to the risk of


recession

.

Kolanovic specifically advised investors to buy corporate bonds, which have fallen sharply along with stocks and government bonds.

“We increase the


corporate bonds

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

However, Kolanovic’s optimism has not paid off so far this year. He has repeatedly told investors to buy stocks, but stocks have continued to fall, and Russia’s invasion of Ukraine also dims the outlook.

Read more: The head of a $2.2bn asset manager who has called the last two big bear markets explains why he has moved virtually all of his positions into cash. He shares what he wants to see before buying again

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