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JPMorgan CEO Marko Kolanovic refrains from early 2023 rally.

Instead, the Institutional Investor Hall of Famer is poised for a 10% or more correction in the first half of this year, telling investors he’s “clearly negative” on the market.

“The fundamentals are deteriorating. And the market is moving up. So it’s going to hit at some point,” the firm’s chief market strategist and head of global research told CNBC’s “Fast Money” on Tuesday.

Last week, Kolanovic reduced his company’s exposure to the stock due to underweight. In a recent note, he warned that the market is currently not pricing in a recession. Its base case is hard landing.

“Short-term interest rates have moved a lot over the last six months and are likely to go a little bit higher and stay there,” he said. “The consumer took on a lot of debt. Interest rates went up. The consumer was resistant, and that was our thesis last year… But over time, they are less and less resistant.”

Kolanovich, ranked as the number one stock strategist by Institutional Investor for the twelfth time, cited troubling trends in recent key economic data, including ISM services, retail sales and the Philadelphia Fed Survey, as reasons for the decline.

“We think things are going south first, getting a lot worse,” Kolanovic said.

However, the technological weight Nasdaq: up more than 8% so far this year, and S&P 500: increased by almost 5%. It closed at 4016.95 on Tuesday.

He lists positive developments, including China’s reopening from Covid-19 lockdowns and weaker ones dollar for market enthusiasm. Kolanovic believes they helped create a narrative of how bad things are behind us, and last year the “somehow magical” decline happened.

“I just don’t think we can run this economy with 5% interest rates,” said Kolanovic, who noted that private equity and venture capitalists cannot exist in this type of environment. “Something’s got to give, and the Fed’s got to loosen up.”

And that could happen this year as a rate cut.

“At some point they will [the Fed] stand it back So the big question is where? This is [the S&P at] 3600? 3400? 3200? We do not have such strong conviction. But we think the direction is lower,” he said. “Usually there’s some infection or something that happens out of the blue.”

Kolanovic is on the list Treasury bonds and cash as viable hiding places.




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