Marko Kolanovic: Central banks will not cut interest rates
In an investor note, JP Morgan Chase strategist Marko Kolanovic warned his clients that stocks and other risk assets cannot sustain potential rallies without significant interest rate cuts by central banks.
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The strategist also argued that central banks will not implement interest rate cuts unless markets fall significantly or the economy stalls, and stated that investors should prefer cash or bonds over stocks.
Kolanovic said, "This means we should expect to see some decline and volatility in the markets throughout 2024 before monetary conditions are eased and a more sustainable rally begins."
Maintaining his bearish stance throughout this year's stock market rally and reiterating his defensive position by telling clients that bond yields offer a "high performance hurdle rate" for other assets and strategies, Kolanovic noted that while treasury yields have generally declined, he estimates that even in the most optimistic economic scenario, stocks will only outperform bonds or cash by 5%.
The strategist emphasized that in an environment where growth slows or a recession occurs, stocks could underperform cash by around 20%.