For JPMorgan equity strategist Marko Kolanovic, the risk-reward of holding bonds at the current level of short-term yields looks better than equity than any time since the great financial crisis.
“Leadership of equity markets has also been upside-down given the yields moving higher. In fact, it is the lower quality, long-duration segments such as unprofitable and speculative tech that has been at the forefront of the rally .’, but this behaviour is not just fighting but also taunting the Fed with crypto, meme stocks, and unprofitable companies responding best to Fed communications. Retail activity are near record high with over 20 per cent of all market volume coming from retail orders.
In particular, there’s concern about reports that Russia is preparing a new offensive against Ukraine.Kolanovic also sees headwinds from China. “The relationship of the West with China has also been deteriorating recently, and as China regains economic momentum, one should expect more rather than less geopolitical tensions.”
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