Wall Street's top strategist Marko Kolanovic said the worst of the sell-off might be behind us after the stock market suffered wild price swings amid escalated geopolitical tensions. "The Russia/Ukraine crisis will continue to produce market volatility, but the direct impact on corporate earnings should be small. Indirect risks are more substantial, given effects of higher commodity prices on inflation, growth, and consumers," JPMorgan's Kolanovic said in a Monday afternoon note. "However, one silver lining is that the crisis forced a dovish reassessment of the Fed by the market." The top-rated strategist listed reasons why the environment is only turning better for risk assets, including limited impact from sanctions on Russia, contained energy price increases and less aggressive policy tightening given the geopolitical risks. The S & P 500 suffered a sharp sell-off in 2022, down more than 8%, as geopolitical risks added to fears of inflation and higher interest rates. The tech-heavy Nasdaq Composite bore the brunt of the sell-off and dipped into correction territory, falling more than 10% from its record high. Kolanovic said tech stocks have approached oversold conditions. JPMorgan's Kolanovic was one of the few on Wall Street who correctly called the March 2020 bottom and the subsequent rebound. He was promoted to chief global markets strategist from the bank's head of macro quantitative and derivatives strategy in 2021. The strategist also believes that the Russia-Ukraine is unlikely to spread to other Eastern European countries that are NATO members. Moreover, he said the rise in oil prices should create some supportive flows for equities via Sovereign Wealth Fund accumulation and oil company buybacks. Kolanovic has a doctorate in theoretical physics, and he's known for using alternative and quantitative data to predict the stock market's ups and downs.
Traders on the floor of the NYSE, Feb. 28, 2022.
Wall Street's top strategist Marko Kolanovic said the worst of the sell-off might be behind us after the stock market suffered wild price swings amid escalated geopolitical tensions.