JPMorgan's Chief Strategist Kolanovic sees the reopening trade restarting in a big way

Published Tue, Apr 20 202112:12 PM EDTUpdated Tue, Apr 20 202112:13 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

One of Wall Street's top strategists who's nailed the markets' moves during the pandemic said the reopening trade is not over and is instead about to kick into gear once again. Marko Kolanovic, JPMorgan's chief global markets strategist, said in a note on Tuesday that the recent pullback in areas like cyclical stocks (names linked to overall economic growth) and Treasury yields will soon prove to be temporary. Reopening trades and interest rates rose steadily from late last year into March as investors bet on the U.S. economic recovery, but those trades have cooled off in recent weeks "Our view is that the reflation and reopening trade will resume, with yields moving higher and rotation from growth, quality and defensives to value and cyclicals," Kolanovic wrote. "Beneficiaries will include Energy, Financials, Materials, Industrials, small caps, high beta stocks, and various reopening and inflation themes." That transition will pick up steam as the U.S. moves into the late spring and summer, and the slower rollout of vaccines in Europe and emerging markets will help to prolong that rotation, he added. Kolanovic rose to prominence during the pandemic for his timely market calls, including being one of the few who correctly predicted the market's bottoming out in March 2020. He was formerly JPMorgan's head of macro quantitative and derivatives strategy. These reopening and cyclical plays have retreated in recent weeks. The Energy Select Sector SPDR Fund , for example, is down more than 10% from its mid-March peak. That presents an opening for investors to jump back in ahead of the rotation's return, the strategist said. "Given our view on reopening, reflation and factors, and the significant pullback in the reopening theme over the last few weeks, we think investors should buy reopening epicenter stocks and sectors," Kolanovic said. "With US and Europe cases now declining, the fast pace of vaccination and seasonal tailwinds (norther hemisphere), we believe that the reopening and reflation trade will resume with a move that will be bigger than we saw early this year," he added.

JPMorgan's Marko Kolanovic.

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