JPMorgan strategist Marko Kolanovic is urging investors to shrug off warnings of a bubble forming in the stock market and buy up shares that dip in the fallout between retailers and short-sellers that has made the market volatile.
The S&P 500 fell as much as 2.1 percent on Wednesday, its biggest decline since October, as hedge funds bore the brunt of selling when some of their bearish wagers went awry, forcing money managers to unload profitable bets to cover losses.
The S&P 500 gained about 1.5 percent on Monday after closing out last week with a 3.3 percent weekly loss.
The market squeeze was occasioned by retail traders whipping up chatrooms against hedge fund short positions in what is now referred as the “GameStop Frenzy“.
Known for calling the 2020 turnaround, Kolanovic encouraged investors to use the mid-week market pullback to pile on more stocks.
“Currently there are no signs of exuberance in institutional equity positioning,” the Global Quantitative and Derivatives Strategist wrote in a note.
“Any market pullback, such as one driven by repositioning by a segment of the long-short community (and related to stocks of insignificant size), is a buying opportunity.”
Kolanovic cited three reasons for this outlook:
There has been a growing chorus warning of a bubble forming and predictions of a correction positioned to peak in the first quarter.
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Michael Hartnett, chief investment strategist at Bank of America, said in a note that investors may face headwinds from higher inflation in the second quarter and a possible dovish Federal Reserve at the March, April and June meetings.
Kolanovic has remained bullish on stocks, asking investors to remain risk-on as mass covid-19 vaccinations help drive a period of synchronized global growth.
