JPMorgan strategist issues stock warning

The risk-on mood that has fueled this year’s stock rally, headwinds from banking turbulence, an oil shock and slowing growth are set to send stocks back to their lowest levels of 2022, according to JPMorgan strategist Marko Kolanovic. “The Fed has indicated it doesn’t intend to cut interest rates this year, but risk assets are staging an unprecedented rally as European stocks trade near all-time highs and U.S. stocks recover from recent losses. We expect risk sentiment to reverse and the market to retest yearly lows in the coming months,” Kolanovic wrote in a note to clients on Monday. Stocks have held their own this year despite rising interest rates that have dented corporate profits, slowed growth and triggered a series of bank failures in the U.S. and overseas. The benchmark S&P 500 is up 7% in the first quarter after falling nearly 20% in 2022, while gains in tech stocks have propelled the Nasdaq 100 to a 20% gain since early January and into a bull market. Tech has been outperforming lately as investors have ramped up bets that banking system stresses will prompt the Fed to tap the brakes on its tightening campaign. But in Kolanovic’s view, inflows into stocks over the past few weeks have been “somewhat logical” and largely driven by systemic investors, a short squeeze and a decline in the Cboe Volatility Index, or VIX.