It is "far too early" to abandon the reopening trades that led the S & P 500 higher in the first half of 2021, according to one of JPMorgan's top market strategists. Despite a recent reversal in the popularity of the reopening trades like materials and energy, fears that the economic recovery may be peaking are overstated and fail to appreciate a worldwide rebound as vaccine deployment goes global, Marko Kolanovic wrote. Kolanovic, who gained a following on Wall Street over the past two years for his timely market calls during the coronavirus pandemic , told clients in a note published Monday that he still recommends a risk-heavy, equity-forward strategy. The prior month's underperformance of stocks that track the health of the economy reflects "overblown fears around the delta variant's impact on growth and mobility," the strategist wrote. "In our view it is far too early to fade reopening/reflation trends, as we are in the early stages of the post-pandemic recovery (the world hasn't reopened yet) not late-cycle, and inflation is likely to continue to realize above market expectations." "The pullback thus creates a strong opportunity for investors to position for the outperformance of cyclical and value assets over bonds, defensives and growth," he added. Kolanovic's remarks came as some on Wall Street pulled back on stocks in sectors and companies that benefit most when the U.S. economy is accelerating. Those stocks, including energy producer Exxon Mobil , cement supplier Vulcan Materials and lender Citigroup , began 2021 with robust gains as investors snapped up so-called cyclical stocks to bet on a comeback in economic activity. But as some traders began to worry that the U.S. gross domestic product growth may have peaked, the momentum began to shift back into high-growth and Big Tech names like Apple and Amazon throughout the month of June. Exxon, for example, is up 48% year to date, but down about 1.4% over the last month. Amazon, alternatively, is up just 14% in 2021, but has gained nearly 11% over the last month. But Kolanovic said that pivot away from reopening trades and back into the relative safety of growth-oriented firms like Apple, Alphabet and Amazon is premature. He and others have noted that, while some two-thirds of the U.S. population have received at least one Covid vaccine dose, much of the rest of the world has yet to resume normal business activity. "Growth is poised to accelerate further with international reopening and service-based consumption gaining traction," Kolanovic wrote. "This set-up looks ideal going into 2021 summer/holiday and back-to-school season, which we believe will be one of the strongest on record due to robust demand and pricing environment." — CNBC's Michael Bloom contributed reporting.
An image of Carnival Splendor cruise ship at the Overseas Passenger Terminal in Circular Quay on March 22, 2020 in Sydney, Australia.
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It is "far too early" to abandon the reopening trades that led the S&P 500 higher in the first half of 2021, according to one of JPMorgan's top market strategists.
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