The performance of equity benchmarks during May could be a “template” for the rest of the year, says JPMorgan's Marko Kolanovic.
JP Morgan’s Marko Kolanovic, one of the most closely followed quantitative analysts on Wall Street, augured in a note to clients on Wednesday that U.S. stocks could see a torrid rebound during the latter half of 2022.
As a reminder, bearish comments from Dimon and St. Louis Federal Reserve Bank President James Bullard contributed to the selloff in stocks , driving the S&P 500 SPX down 0.8%, while the Dow Jones Industrial Average DJIA lost 0.5% and the Nasdaq Composite COMP dropped 0.7%. That left the S&P 500 down 14% for the year to date.
Kolanovic cited a few factors that helped drive the raucous equity bounce that helped spur the S&P 500 and Dow to finish May with tiny gains . “Bears are saying, ‘only the Fed making a U-turn can change the course of markets here.’ We think this is not true as what is needed is incremental change relative to the significant amount of tightening already priced into the market. In fact, when positions get to minimum thresholds , even bad news cannot push the market substantially lower.”
With “defensive” stocks already trading near record relative valuations to the rest of the market, Kolanovic sees the most opportunity in the comparatively unloved market segments, including Chinese ADRs , small-caps , energy and biotech. All these segments are trading near all-time-low relative valuations.
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