Written by Sam Bogda
Marko Kolanovic said in a note to clients on Monday that the Fed’s tightening was “leaving stocks in oversold territory.”
Kolanovic explained that the trajectory of global inflation has become “more central to tactical asset allocation.” As a result, JPMorgan believes it can keep volatility elevated until the next set of CPI releases. However, the company notes encouraging signs on the front with lower commodities as “supply chains are returning to more normal and strength is putting downward pressure on input prices, lower energy prices, and leading indicators down on rents.”
JPMorgan also believes that “some of the preconditions for a market bottom are falling into place”.
“Stocks are looking increasingly cheap and approaching deep value outside of the US, and the situation is very weak,” Kolanovic added.
“Stocks and bonds continued to sell last week on the back of central bank optimism. The hawkish Fed result with significant upward revision of points now leads us to expect a final rate of 4.5% by early 2023. While the market is now stable in the view that the Fed will continue At the mega-highs, we don’t think one should continue extrapolating the direction of a hard-line policy stance.”