Here Comes Marko... Buy Equities, Selling is Overdone - JPMorgan's Top Quant Kolanovic

January 24, 2022 1:16 PM EST
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Marko Kolanovic, the Head of Global Markets Strategy at JPMorgan, urged investors to buy equities as recent bearishness is overdone.

Kolanovic implies that the market seems disconnected from the activity momentum, easing bottlenecks, and his expectations of a strong earnings season.

“While some are concerned that rising input prices will eat into margins, we expect margins to remain resilient thanks to strong activity and prices outpacing wage inflation. We are also bullish on Asia equities, with China policy expected to become more growth supportive. Ex-China we are OW Financials as earnings are leveraged to short rates and growth, and the selloff on margin concerns appears excessive,” the quant said in today’s report.

On the technical side, the pullback also seems overdone with some indicators approaching oversold territory.

“While the market struggles to digest the rotation forced on it by rising rates, we expect the earnings season to reassure, and in a worst case scenario could see a return of the “Fed put”.”

“We remain very positive on earnings outlook for 2022, expecting another year of significant beats. Q4 activity momentum has seen a firming vs the summer, with global PMIs higher, a bounce in Asia, and easing in certain bottlenecks. On the other side, consensus EPS growth expectations are lower than what was delivered in Q3, creating a favorable tradeoff,” Kolanovic added.

All in all, the market seems to be in the final stage of this correction, according to Kolanovic.

By Senad Karaahmetovic | [email protected]

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