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JPMorgan's Marko Kolanovic, who called the bottom in stocks back in March and has recommended investors stay bullish throughout the second quarter market rally, just doubled down on his bullish call for US stocks.
The bank listed three reasons why investors should remain bullish on stocks over the short to medium term.
Investor positioning, strong monetary and fiscal policy support, and COVID-19 infection data support Kolanovic's call to stay bullish on stocks.
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Investors should continue to stay bullish on US stocks in the short to medium term, JPMorgan's Marko Kolanovic said in a note published on Tuesday.
Kolanovic correctly called the bottom in stocks in March, and has remained bullish on stocks throughout the second quarter, which posted its best quarterly rally since 1987. Kolanovic has often reminded investors why they should stay bullish along the way.
Now, Kolanovic lists three new reasons why investors should continue to favor US stocks.
1. "Positioning remains light around macro and systematic investors." Kolanovic said summer seasonality "should help the volatility spike continue to fade," which could drive investors to further add exposure to stocks throughout the summer. Additionally, momentum signals "are mostly positive for US large caps," which could drive traders to buy.
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2. "Monetary and fiscal policy support." The COVID-19 pandemic led to a run on liquidity during the February and March sell-off. According to Kolanovic, liquidity "plunged 90% to record lows, as measured by S&P 500 futures market depth." Since then, liquidity "has recovered meaningfully from the March lows," and many investors credit monetary policy by the Fed for assuaging liquidity concerns and keeping credit markets functioning.
3. "Higher COVID-19 incidence is mainly impacting younger populations." Kolanovic said the recent surge in COVID-19 cases over the past few weeks is not impacting the older population like it did in March and April, and that the younger population has "drastically lower mortality rates and likely reflects higher testing rates, recent protests, backlogs of hospital visits, and increased economic activity.