JPMorgan Strategist Advises to Trade Stocks for Gold Amid Recession Concerns

JPMorgan Strategist Advises to Trade Stocks for Gold Amid Recession Concerns


JPMorgan’s chief global markets strategist advises investors to diversify into cash and gold amidst global recession fears, as the risk-reward for equities is poor given elevated risk of recession, stretched valuations, high rates and tightening liquidity.

JPMorgan’s chief worldwide markets strategist Marko Kolanovic has suggested investors reevaluate their portfolios amid worldwide fall fears, recommending investors reduce their stock holdings and diversify into cash and gold as a precautionary measure.

Reports by Markets Insider, Kolanovic recently expressed concerns in a memorandum regarding the buoyant rally of stocks in the year, which have seen a near 10 percent boost to date. He said:

Even aside from the debt ceiling issue, we maintain that the risk-reward for equities is poor given elevated danger of fall, stretched valuations, high prices and tightening liquidity, and we favor cash over equities at the former’s ~5 percent yields.

His comments were accompanied by a note of discord regarding the optimism of the fed funds futures, which anticipate numerous interest price cuts by year’s end. Such a scenario, Kolanovic argues, is unlikely to herald positive  tendency trends, as these cuts would typically only be introduced as a response to a severe economic downturn or a jolt to the financial markets.

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The CME FedWatch Tool, which monitors market anticipation, as of now predicts one to two 25 basis-point interest price cuts by the close of the year. Kolanovic thinks that if these reductions fail to materialize, leading to sustained high interest prices, this could depress stock valuations and curb economic growth.

In doing so, the JPMorgan executive sees negative implications for the stock market, regardless of the fluctuation of interest prices over the months ahead. As a result, he augmented the cash allocation in JPMorgan’s model portfolio by 2%, a move financed by growing back stocks and corporate bonds by 1 percent each.

The JPMorgan exec likewise pointed to the value of gold as a refuge during times of uncertainty, particularly given its recent 5 percent fall in value and the ongoing complexities of debt-ceiling negotiations.

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The debt ceiling is the legal limit on how much the United States Government can borrow to pay its bills. It was reached earlier in the year, and the United States Treasury has ever since been using “extraordinary measures” to keep the Government running, but warned that these may be exhausted as early as next month.

If the United States Congress fails to raise the debt ceiling by then, it will have to either default on its obligations or cut spending drastically, both of which are expected to have severe consequences for markets and the worldwide economy.

Although while JPMorgan elieves the debt ceiling will be lifted or stopped, it may occur on the eleventh hour and “drive significantly higher market instability than appreciated by the market currently.”

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As CryptoGlobe informed, both Bitcoin (BTC) and gold have led the charge so far in the year. The flagship digital currency is frequently seen as a digital version of the precious metal that improves upon it, making it easily interchangeable and divisible.

It’s worth noting that, Poland’s monetary authority has  amassed 14.8 tonnes of gold in April, signaling the nation’s proactive response to economic uncertainties.

Reports by the report, the net worth of the country’s gold, comprising gold deposits and swapped gold, escalated to a substantial $15.52 Billion in April, compared to the preceding value of $14.55 billion.

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