Marko Kolanovic, head of Quantitative and Derivatives at JPMorgan, believes the shares will continue to rise in October and in the coming months. Especially if the US-China talks are going well.
Investors continue to position themselves more aggressively in value stocks and as a result of last month's sell-offs on stocks and bonds. This has also led to low extremes in bond yields. Kolanovic remains bullish, thinking it will continue to rise with the help of central banks and fiscal stimulus.
The strategist also points out that markets are flat in January 2018, with most of the S & P500's growth coming from the defensive sectors. Many of these items are already starting to sell out. Given how heavy the S & P500 is with defensible assets, bond types, releasing them will give room for strong growth in small caps, cyclical stocks and emerging market stocks.
In recent recessions, bond yields have increased and indices have made relatively small movements, but recent movements in the stock market have been quite aggressive. The ongoing rotation is mainly reflected in the movements of the iShares Edge MSCI Momentum Factor ETF and iShares S & P500 Value ETF. Until recently, they were correlated, but it was already broken.
In July, Kolanovic warned investors that this correlation was about to be broken, with the observed divergence being the worst of the technology bubble in 1990.
It is this unprecedented divergence that makes it possible to make the deal of a lifetime, a deal once in a decade. He also noted another divergence - one between large-cap and small-cap companies.
While production is lagging behind, according to Marko Kolanovic, we can expect manufacturing activity to increase in the coming months because of the fiscal stimulus that underpins markets and value stocks. The October negotiations will be essential and will determine market performance and the global economy by the end of the year and beyond.
The strategist remains optimistic but with one in mind for negotiation. So far, voters surveyed blame Trump for bad trade policy, market volatility. More than half would even say he would be guilty if a recession occurred.
Source: CNBC
Photo: Twitter
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