SMM

Marko Kolanovic, chief market strategist and co-head of global research at JPMorgan, said Monday that the current widespread belief among US stock investors that the "darkest hour" is over may prove to be wrong, as the risk of recession is still looming.
He reiterated that US stocks will weaken for the rest of the year as the full impact of rate hikes on the economy and some of the factors underpinning growth, such as strong corporate profit margins, wane.
The Federal Reserve raised its benchmark rate by 25 basis points again last week, reaching its highest level since 2007. The move was widely seen by traders as the last rate hike of the current monetary tightening cycle. Market pricing suggests that investors expect the Fed to start cutting interest rates before the end of the year.
In a report to clients on Monday, Kolanovic wrote that what the stock market and broader risk markets refused to acknowledge was that if there was a rate cut this year, it would be either because of the start of a recession or because of a major crisis in financial markets.
Kolanovic was one of Wall Street's biggest optimists for much of the 2022 stock market sell-off, but he has since changed his view, cutting the equity allocation in the bank's model portfolio in mid-December last year, January and March this year as the economic outlook worsened.
He warned in late April that equity investors should proceed with caution, as even a mild recession could cause US equities to fall by 15 per cent or more.
Kolanovic said the cumulative impact of Fed tightening was also expected to be amplified by the US banking crisis.
The report also said that other headwinds for investors include the narrowing spreads between the bond market, the stock market and the Fed, and the looming deadline for raising the US debt ceiling.
Meanwhile, an unexpectedly upbeat earnings season for US stocks did not change the bank's view on slowing economic growth.
Kolanovic said that in his view, beyond these hard-to-interpret surprises and bottom-up analyst forecasts, the overall picture remained that revenue and earnings growth remained on a downward trajectory.