The stock market has already discounted a modest recession, and that means investors can bet on a rebound, according to a top strategist at JPMorgan. Fears of a recession have steadily grown since the start of summer, and many economists expect a second-consecutive negative GDP reading later this week. However, JPMorgan's Marko Kolanovic said in a note to clients on Monday that the stock market's year-to-date declines and lower estimates from Wall Street analysts show that negative economic news is already priced in. "While recession odds are increasing, a mild recession appears already priced in based on the YTD underperformance of Cyclical vs. Defensive equity sectors, the depth of negative earnings revisions that already matches past recession moves, and the shift in rates markets to price in an earlier and lower Fed Funds peak," Kolanovic wrote. One potential positive for stocks is that bond traders are starting to bet that the Federal Reserve may have to cut rates next year. The Fed's rate hikes, which began in March, is one of the reasons many Wall Street pros point to for this year's rough market. "With the peak in Fed pricing likely behind us, the worst for risk markets and market volatility should also be behind us," Kolanovic wrote. Defensive stocks have generally outperformed high-growth areas such as tech this year, but the Nasdaq Composite has gained about 7% in July. As investors get more comfortable with the path of a recession, growth stocks will find their footing, Kolanovic said. "We have been arguing to tactically favor Growth over Value, which can also be expressed through a better showing of the Tech sector. Traditional Defensives show the worst relative valuations vs historical, with Staples' relative P/E currently trading at an all-time record, even taking into account the most severe recessions over the past 20- 30 years," Kolanovic wrote. Kolanovic has remained largely optimistic about stocks in 2022 despite a rough first half that dragged the S & P 500 into a bear market. The strategist said last month that he expected the S & P 500 to finish the year flat. — CNBC's Michael Bloom contributed to this report.