JP Morgan Kolanovic says even a mild recession could cause US stocks to fall by 15%

Marko Kolanovic is JPM's chief global markets strategist. He says that much of the rally in U.S. stocks since the beginning of 2023 has been driven by "irrational" factors like short-covering and systematic inflows:

• Kolanovic recommends JPM clients keep equity allocation underweight, & overweight in cash
• stay overweight Japanese stocks

Citing:

• "On the downside, even a mild recession would warrant retesting the previous lows and result in 15%+ downside"
• “Even in an optimistic scenario of soft landing Soft landing A "soft landing" in the economy refers to a situation where economic growth slows down, but does not fall into a recession. This is often the desired outcome for policymakers, as it allows them to make adjustments to the economy without causing widespread job losses or other negative effects associated with recessions.An example of a soft landing in the economy occurred in the United States between the years of 2004 and 2006. During this time, the Federal Reserve raised interest rates to cool do A "soft landing" in the economy refers to a situation where economic growth slows down, but does not fall into a recession. This is often the desired outcome for policymakers, as it allows them to make adjustments to the economy without causing widespread job losses or other negative effects associated with recessions.An example of a soft landing in the economy occurred in the United States between the years of 2004 and 2006. During this time, the Federal Reserve raised interest rates to cool do Read this Term (which even the Fed The Fed "The Fed" is a short-hand that refers to the Federal Reserve or Federal Reserve System, the central banking system of the United States. Traders often discuss the actions of the Fed, primarily interest rate decisions, as they significantly impact all financial markets.The Fed shouldn't be confused or substituted with the term "the Feds" and doing so tells everyone you're a total noob. The term "the Feds" refers to US Federal law enforcement, including such agencies as the FBI (Federal Bureau of "The Fed" is a short-hand that refers to the Federal Reserve or Federal Reserve System, the central banking system of the United States. Traders often discuss the actions of the Fed, primarily interest rate decisions, as they significantly impact all financial markets.The Fed shouldn't be confused or substituted with the term "the Feds" and doing so tells everyone you're a total noob. The term "the Feds" refers to US Federal law enforcement, including such agencies as the FBI (Federal Bureau of Read this Term deems unlikely based on the March Board staff forecasts), equity upside is likely less than 5% and that is the return that is delivered by short-term fixed income.”
• "Short-term fixed income provides not only full protection on the downside but also optionality to buy risky asset classes should this pullback happen"