Investors should fade the early 2023 rally, warned JPMorgan’s top market strategist Marko Kolanovic. The first quarter will likely mark a turning point for the market – and its upward trajectory probably won’t continue, he said. “The fundamental confirmation for the next leg higher might not come,” Kolanovic said in a Monday note to investors. “And instead markets could encounter an air-pocket of weaker earnings and activity as they move through Q2 and Q3.” He anticipates that the backdrop for corporate profits will start to turn lower as pricing power reverses. The strategist’s comments arrive as stocks take a breather from their latest run. Still, the S&P 500 is up more than 5% for the year, while the Nasdaq Composite has bounced more than 9%. The Dow Jones Industrial Average is up about 2.3% in 2023. Kolanovic also foresees a “postponement rather than fading of recession risk.” Though U.S. gross domestic product rose at an annualized pace of 2.9% in the fourth quarter, there is weakness underlying that headline number, “as private demand printed its weakest growth since the start of the recovery,” the strategist said. “A weak trajectory for US domestic demand keeps recession risk elevated, even as the tightness in labor markets postpones this recession risk,” Kolanovic wrote. “Meanwhile, restrictive real policy rates represent an ongoing headwind, keeping the risk of a recession later in the year high.” submitted by /u/Aegidius25 [comments]
