JPMorgan’s Kolanovic says the market is now ‘getting cheap,’ favors economic recovery stocks

Published Wed, May 12 20211:32 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

JPMorgan 's Marko Kolanovic told CNBC on Wednesday he feels the stock market's recent declines are "overdone a little bit," creating opportunities for investors. "I think market is now actually getting cheap, in some sense," the firm's chief global markets strategist said on "Halftime Report." He added, "I think we're at the end of this upset. I think the market is going to go higher here. That said, we do still again prefer reflationary themes." Kolanovic's remarks came as the Dow Jones Industrial Average was down nearly 500 points Wednesday. The tech-heavy Nasdaq fell around 2.1%, while the broad S & P 500 was lower by roughly 1.6%. The market moves came as investors digested the latest monthly reading on consumer prices , which came in hotter than Wall Street expected and reignited some concerns around inflation. Kolanovic said he shares the view that inflation and bond yields are likely to move higher, putting pressure on technology stocks that outperformed in 2020. Weakness in technology, however, does not mean the overall S & P 500 cannot rally, Kolanovic said. The equity index is down about 1% over the past month. Instead, he favors cyclical stocks in sectors such as energy that stand to benefit from the U.S. economy's recovery from the coronavirus pandemic. "As yields go a higher, a rotation continues. We think it actually has a lot more legs, but that doesn't mean that the market has to go down," Kolanovic said. "That can happen actually in an up market because we're going to be adding jobs. We're going to be adding economic activity. There's going to be demand, so we think everything can go up. Not just the value, but value would lead, in our view." Kolanovic's year-end price target for the S & P 500 is 4,400, representing about 7.5% upside from where it traded intraday Wednesday around 4,090. Kolanovic also said he believes the Federal Reserve will remain on its current monetary policy course, pushing back on the idea that the April inflation data could move up the timeline of when the central bank reduces its monthly asset purchases or adjusts interest rates. "We're not worried for now," he said. "We think it's not going to happen this summer. We'll revise it in the fall, see what happens towards the end of the year. But it's not given that taper needs to crash the market. If the economy is strong, maybe that's actually the right decision at that point in time. The Fed was very clear they're not going to do anything now."

Traders work on the floor of the New York Stock Exchange on Nov. 4th. 2020.

NYSE

JPMorgan's Marko Kolanovic told CNBC on Wednesday he feels the stock market's recent declines are "overdone a little bit," creating opportunities for investors.

"I think market is now actually getting cheap, in some sense," the firm's chief global markets strategist said on "Halftime Report." He added, "I think we're at the end of this upset. I think the market is going to go higher here. That said, we do still again prefer reflationary themes."

Kolanovic's remarks came as the Dow Jones Industrial Average was down nearly 500 points Wednesday. The tech-heavy Nasdaq fell around 2.1%, while the broad S&P 500 was lower by roughly 1.6%.