Reply To: Morgan Stanley Calls U.S. Stock Market Rally a FOMO Head Fake


JPMorgan’s Kolanovic is even more bearish today:

Trim allocation to stocks and corporate bonds
Up stake in cash by 2%
Rotate out of energy and into gold (citing haven demand and as a debt-ceiling hedge)

Kolanovic’s main 3 reasons are:

The limbo for debt-ceiling negotiations
Elevated risk of recession
Hawkish Federal Reserve

“Hopes of a swift resolution to the US debt ceiling have somewhat bolstered market sentiment”

Despite last week’s rebound, risk assets are failing to break out of this year’s ranges

Credit and commodities are trading at the lower end of this year’s ranges

Divergence remains between rates markets that expect the Fed to cut this year, equity markets that interpret those potential cuts as positive for risk, and the Fed’s more hawkish rhetoric

This gap is likely to close at the expense of equities

Rate cuts will likely only transpire from a risk-off event, and if rates stay higher they should weigh on equity multiples and economic activity