Kolanovic Sees ‘Dissonance’ In Markets. Warns Of Stock Selloff
JPMorgan's Marko Kolanovic sees evidence of "dissonance."
Markets steadfastly refuse to give up on the notion of Fed cuts commencing in the back half of the year. Risk assets, liking the idea of a quick pivot to easing following the most aggressive tightening cycle in a generation, are accordingly buoyant. And yet, Fed officials are adamant that the odds of rate cuts in 2023 are quite low given inflation realities and, at least for now, a resilient labor market.
For Kolanovic, that's an awkwar
I would tend to agree with Marko. The narrow equity market, still overpriced for the seven samurai and special situations like LLY at 50x ttm, are leaving retail investors with fewer and fewer choices. Among the possible scenarios, the one I like best is the one that keeps rates steady with no pivot, offers a mild recession, calmer banks, a stock market that wants to be more realistic, and falling, but moderate (3.5%) inflation. Probably this picture is missing a piece here and there. But be gentle; I’m old.
I’d vote for it.
Inflation optimists need shelter CPI to sink to flat, quickly. Looking over the housing REIT reports (rents), I am not really seeing that – realized rents are not jumping mid-teens YOY but they aren’t slumping to flat or low-single digits. Mid/high-single digit rent growth seems the most common, occupancy rates are very high, supply growth will be shortlived as few new projects are being started. AIA index report for March: “ firms with a multifamily residential specialization saw conditions weaken to the lowest level since the early days of the pandemic. “ And those REITs are starting to move up (prices).