JPMorganโs 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.
Reportsย by Markets Insider, Kolanovic recently expressed concerns in a memorandum regarding the buoyant rally of stocks inย theย 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 formerโs ~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 yearโs end. Such a scenario, Kolanovic argues, is unlikely to herald positiveย 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.
The CME FedWatch Tool, which monitors market anticipation, asย ofย now predicts one to two 25 basis-point interest price cuts by the close of the year. Kolanovic thinksย that if these reductions fail to materialize, leading to sustained high interest prices, this could depress stock valuations and curb economic growth.
Inย doingย so, the JPMorgan executive sees negative implications for the stock market, regardlessย of the fluctuation of interest prices over the monthsย ahead. Asย aย result, he augmented the cash allocation in JPMorganโs 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.
The debt ceiling is the legal limit on how much the Unitedย States Government can borrow to pay its bills. It was reached earlier inย theย year, and the Unitedย States Treasury has everย since been using โextraordinary measuresโ to keep the Government running, but warned that these mayย be exhausted as early as next month.
If the Unitedย 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.
Althoughย while JPMorgan elieves the debt ceiling will be lifted or stopped, it may occur on the eleventh hour and โdrive significantly higher market instability than appreciated by the market currently.โ
As CryptoGlobe informed, both Bitcoinย (BTC) and gold have led the charge so far inย theย year. The flagship digitalย currency isย frequently seen as a digital version of the precious metal that improves upon it, making it easily interchangeable and divisible.
Itโsย worthย notingย that, Polandโs monetaryย authority has ย amassed 14.8 tonnes of gold in April, signaling the nationโs proactive response to economic uncertainties.
Reportsย by the report, the net worth of the countryโs 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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