Kolanovic says shares will fall, will increase JPMorgan’s publicity to money and gold

JPMorgan is telling its purchasers so as to add to money and gold positions on the expense of equities and bonds.

The financial institution’s analysts imagine the equities rally is “misplaced” provided that the market hasn’t “priced in a fabric danger of failure to boost the ceiling to start with, and as negotiations are removed from full.”

Even when the deal is reached, analysts remind buyers that the risk-reward in shares is “poor”. They cite the elevated danger of recession, stretched valuations, excessive charges, and tightening liquidity as key causes underpinning their stance.

“A divergence stays between charges markets that anticipate the Fed to chop this yr, fairness markets that interpret these potential cuts as constructive for danger, and the Fed’s extra hawkish rhetoric. This hole is prone to shut on the expense of equities, as price cuts will possible solely transpire from a danger off occasion, and if charges keep larger they need to weigh on fairness multiples and financial exercise,” analysts wrote in a observe.

In consequence, they elevated JPM’s money allocation by 2% after chopping publicity to shares and bonds by 1% every.

“Inside commodities, we rotate from power (given recession dangers and a doubtlessly fading China progress impulse), to gold following its latest sell-off (on its safe-haven demand and as a debt ceiling hedge),” the analysts added.

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