JPMorgan’s Resident Permabull Marko Kolanovic Says “Take Profits”

If it sometimes feels like JPMorgan’s global head of markets strategy Marko Kolanovic has turned into a broken record, and tells the bank’s retail clients (and anyone else who listens) to buy the dip every single week… well, that’s because it’s true as the following chart of weekly bullish proclamations by the Croat makes abundantly clear.

And as we mused one month ago, one almost wonders if JPM has an agenda in trying to get retail investors to buy all day, every day the stocks that the bank’s whale hedge fund clients are selling (and for those who laugh at this suggestion, do not read the far more bearish commentary from JPM’s trading desk reserved for a smaller and much more “select” list of clients). In fact, it was JPMorgan’s own Prime Brokerage which last weekend admitted that its hedge fund clients are selling every single rally even as retail investors – perhaps inspired by Marko’s soothing words week after week – continue to buy.

But while its perfectly legal to facilitate what is clearly a “distribution” whereby a bank gets retail investors riled up to keep buying every dip and prop up for the benefit of institutions and hedge funds, one wonder just how ethical it is, especially when the bank’s own institutional-targeted research as published by the bank’s flow trader Andrew Tyler – and which is sent around to a much more “focused” group of clients – has been decidedly more bearish in recent months.

In any case, it appears that Kolanovic has either gotten some pushback from the bank’s retail investors or has finally gotten tired of calling every dip as a buying opportunity, and as Bloomberg puts it, the “steadfast bull on U.S. equities during this year’s selloff, is dialing back his optimism after the market staged a powerful recovery.”

Not that Marko is turning bearish mind you, for that to happen stocks would first have to crash of course – just recall JPM downgrading Chinese internet stocks to Sell literally hours before the biggest short squeeze across the Chinese internet sector in history.

– March 14: JPM, “Chinese tech stocks are uninvestable”, downgrades all China interenet stocks.
– March 16: Chinese tech stocks surge by most on record.

– March 16: JPM: “There is no elevated chance for a recession in 2022 given the strength of the economy”
– …

— zerohedge (@zerohedge) March 17, 2022

Just to make sure that he is still clearly bullish, he starts off his latest note by saying that he “retains a pro-risk view and continue to recommend OWs in equities and commodities and UW in bonds.” Because if nothing in 2022 could derail him from this view, then clearly nothing possibly can – absent a crash of course.

It’s also why while Marko admits that not all may be well looking ahead, things are hardly bad, and writes that “although growth prospects have been downgraded over the past month, much of this impulse remains and we still see supports from strong labor markets, light investor positioning, healthy consumer and corporate balance sheets, easing policy in China, and fiscal supports in several countries to offset part of the drag from high energy prices.”

However, with that in mind, Marko writes that “markets have recovered a majority of their early-March sell-off and thus no longer look oversold, while risks remain elevated around geopolitics, policy tightening and growth.” As such, Kolanovic says he is taking profits on “the tactical increase to our equity OW initiated last month.”

Of course, as shown in the chart below, the S&P was at 4,300 when he “increased his equity OW”, so we are now a whopping 120 points higher, with Marko clearly missing the opportunity to sell at 4,600 or above just two weeks ago, and lets not even mention his Jan 12 reco to “buy the dip” because “markets can handle higher yields.”  And since the S&P back then was 4,700, in retrospect markets maybe can’t handle higher yields all that well. 

That said, not even Marko’s modest bearish pivot makes any sense, because at the same time he says to take profits, he is trampling all over the call of his Chinese colleague who said less than a month ago to sell the Chinese internet sector and to “avoid it for 6-12 months”…

… and instead the Croat now says that “while the US appears to be on an aggressive tightening path, China is expected to ease as soon as this month. As such, we increase our OW of EM vs. DM stocks.”

In other words, JPM says buy China one month after it said that China’s most iconic, internet stocks are uninvestable.

And before anyone accuses Marko of starting to side with his Morgan Stanley or BofA colleagues, Michael Wilson or Michael Hartnett, he is already several steps ahead with yet another bullish anchor which he can refer to if stocks actually do meltup from here: as he writes, “if bond yield rises continue, they could eventually become a problem for equities, but we believe current real bond yields at around zero are not high enough to materially challenge equities. Given low bond positioning, a further big rise in real yields from here seems less likely.”