JPMorgan's Marko Kolanovic believes the market sell-off won't get much worse than this as Wall Street's top strategist found three big reasons to stay optimistic. Fears of aggressive rate hikes prompted investors to dump risk assets, especially growth stocks in recent weeks. The S & P 500 dropped 4.8% last week, its worst weekly performance since June. Many notable investors including Jeffrey Gundlach and Scott Minerd have been projecting a 20% decline in the S & P 500 by mid-October. Still, Kolanovic, one of the biggest bulls on Wall Street, reassured his clients that downside should be limited because of resilient earnings, low positioning and anchored inflation expectations. "While more hawkish central bank pricing and the resulting increase in real yields is weighing on risk assets, we also believe that any downside from here would be limited given: 1) better than expected earnings growth and signs revisions may be bottoming," Kolavovic said in a Monday note. "2) very low retail and institutional investor positioning, and 3) declines in longer term inflation expectations from both survey- and market-based measures." The Federal Reserve is expected to approve a third consecutive 0.75 percentage point interest rate increase this week, which would take benchmark rates up to a range of 3%-3.25%. Kolanovic gained a wide following after correctly calling the March 2020 market bottom and the subsequent rebound during the pandemic. He was promoted to chief global markets strategist from the bank's head of macro quantitative and derivatives strategy in 2021. The strategist believes that high inflation and robust nominal GDP growth are cushioning nominal earnings growth in an environment of low real growth. Meanwhile, retail and institutional investors are poised to add back equities after being underweight for a few months, Kolanovic said. "We thus remain cautiously optimistic and continue to combine a sizeable equity overweight in our model portfolio with a credit underweight as a hedge," he said. "We stay long the dollar as a hedge to a hawkish Fed and see significant upside on commodities from here." — CNBC's Michael Bloom contributed to this report.