JPMorgan analysts recommend cutting stocks and holding more gold. The team, led by Marko Kolanovic, described some investment vehicles as ‘hedging’ against the debt ceiling debacle.
‘We should get away from risky markets and buy gold and these’
JPMorgan cites the risk of the US debt ceiling, the recession outlook, and the Fed’s hawkish stance. Analysts advise to stay away from risky markets and hold more ‘cash’ and ‘gold’.
With the macro environment taking on a few new risks, a team led by Marko Kolanovic, chief global market strategist at JPMorgan Chase, is mitigating equities exposure, increasing cash holdings by 2% and moving from energy to gold. Analysts cite the safe-haven effects and characteristics of gold as a ‘protection’ against the debt ceiling debacle.
Referring to a note by Kolanovic to clients, Bloomberg said, “Despite last week’s recovery, risky markets are not breaking out of this year’s ranges. Credit and commodities are trading at the lower end of this year’s ranges. Also, stocks are trading close to this year’s highs. Meanwhile, our portfolio of models produced another loss last month. It recorded the third loss in four months,” he said.
“Fed could put more pressure on stocks”
Kolanovic said that in the longer term, the Fed will put more pressure on stocks. The expert says that the Fed will continue to raise interest rates, contrary to the market’s rate cut expectations:
A divergence continues between interest rates markets, which expect the Fed to cut this year, and stock markets, which interpret these potential cuts as positive for risk, and the Fed’s more hawkish rhetoric. This gap will likely close at the expense of equities, as the rate cuts will likely result only from a risk aversion and if rates remain higher it will put pressure on stock multipliers and economic activity.
Kolanovic had expected a recovery in stocks last year. However, it eventually capitulated to the downtrend. Here, JPMorgan cut its allocation of model shares in mid-December, January, March and May.
After Tuesday’s meeting, there was no sign of progress from Joe Biden’s representatives and Republicans in Congress. However, talks are said to resume on Wednesday morning.
Janet Yellen’s statements caused a drop in Bitcoin
US Treasury Secretary Janet Yellen reiterated over the weekend that June 1 remains a “hard deadline” for raising the debt ceiling. Failure to do so will result in a default.
Speaking on NBC’s ‘Meet the Press’ program, Yellen said, “In my last letter to Congress, I stated that we would not be able to pay all our bills at the beginning of June and possibly by June 1. And I will continue to update Congress, but I certainly haven’t changed my assessment. So I think this is a tough deadline.”
cryptocoin.comAs we reported, after Yellen’s statements, Bitcoin and other markets went down.
