Don’t be fooled by Monday’s bounce, JPMorgan’s Marko Kolanovic warned. The bank’s global research co-head wrote in a note that the “correction likely has further to go,” adding that the “current market narrative and patterns are increasingly resembling those of last summer, when upside inflation surprises and hawkish Fed revisions drove a correction in risk assets, but investor positioning now appears more elevated.” The S & P 500 entered the week down more than 5% from an all-time high reached earlier in the year. A correction is generally defined as a 10% drop from a 52-week high. The broad market index was also riding a six-day losing streak. On Monday, the benchmark popped more than 1% — clawing back some of its recent losses — as tensions in the Middle East appeared to have calmed. .SPX 5D mountain S & P 500 5-day chart Still, Kolanovic — one of the most followed strategists on Wall Street — noted that a strong dollar, higher bond yields, elevated oil prices and concentration among a few high flying stocks make up a “problematic backdrop” for equities. “We remain concerned about continued complacency in equity valuations, inflation staying too hot, further Fed repricing, rates moving higher for the ‘wrong reasons,’ and a profit outlook where the implied acceleration this year might end up too optimistic,” Kolanovic wrote. “Market concentration has been very high, and positioning extended, which are typically red flags, at risk of a reversal.” “The combination of these macro factors increases the downside risks, and suggests that more Defensive trading should be appropriate,” he added.
The stock market ‘correction’ is not over yet, JPMorgan’s Kolanovic says
Apr 23, 2024
