J.P. Morgan’s Marko Kolanovic predicts oil is surging greater — however so are shares.
Kolanovic, who serves because the agency’s chief world markets strategist and co-head of worldwide analysis, believes the U.S. financial system is robust sufficient to deal with oil costs as excessive as $150 a barrel.
“There could be some potential further spikes in oil, especially given… the situation in Europe and the war. So, we wouldn’t be surprised,” he informed CNBC’s “Fast Money” on Tuesday. “But it could be a short-lived spike and eventually, sort of, normalize.”
WTI crude is buying and selling round three month highs, settling up 0.77% to $119.41 a barrel on Tuesday. Brent crude closed on the $120.57 mark. The bullish transfer got here as Shanghai reopened from a two month Covid-19 lockdown, opening the door for greater demand and extra upside.
“We think the consumer can handle oil at $130, $135 because we had that back in 2010 to 2014. Inflation adjusted, that was basically the level. So, we think the consumer can handle that,” mentioned Kolanovic, who has earned prime honors from Institutional Investor for correct forecasts a number of years in a row.
His base case is the U.S. and world financial system will keep away from a recession.
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However at a monetary convention final week, JPMorgan Chase Chairman and CEO Jamie Dimon informed buyers he is making ready for an financial “hurricane” which might be a “minor one or Superstorm Sandy.”
Kolanovic contends it is important to be prepared for all prospects.
“We do forecast some slow down,” he mentioned. “Nobody is saying that there are no problems.”
His agency’s official S&P 500 year-end goal is 4,900. However in a latest observe, Kolanovic speculated the index would finish the yr round 4,800, nonetheless on par with all-time highs hit on Jan. 4. Proper now, the S&P is 16% beneath its report excessive.
‘We do not suppose buyers will stick in money’
“We don’t think investors will stick in cash for the next 12 months, you know, waiting for this recession,” Kolanovic mentioned. “If we continue to see [the] consumer especially on the services side holding up — which we do expect — then we think investors will gradually come back into equity markets.”
Kolanovic’s prime name stays power, a bunch he has been bullish on since 2019.
“Actually, valuations went lower despite the stock price appreciation,” Kolanovic mentioned. “Earnings grow faster, so multiples are actually lower now in energy than they were a year ago.”
He is additionally bullish on small caps and high-beta expertise shares which have gotten crushed this yr.