JPMorgan strategist Marko Kolanovic told investors on Monday that the pace of the rally should slow this year as the risk of a recession is simply postponed, not diminished.
“We may not get basic confirmation of the next leg up, and instead the market may encounter an air pocket of lower earnings, activity and capex,” Kolanovic said in a note. Stated. “We are approaching an early break in business spending as last quarter’s slowdown in investment and slowing working hours squeezed margins and squeezed profits.”
Kolanovic said industrial stocks are likely to face a more difficult situation later in the year, and JPMorgan expects demand for Treasuries to ease somewhat. As a result, they decided to wear tactical shorts.
Strategists add that a weak trajectory in US domestic demand will continue to increase recession risks, even if a tight labor market postpones this recession risk.
Further, tightening of the real policy rate is “remaining headwinds and high risk of recession later in the year.”
“By contrast, especially in Europe, we believe the upside from here is limited as the probability of recession priced in across risk assets is small,” Kolanovic concludes. .