JPMorgan's Kolanovic On Stocks, Gold And Advice For The Fed

In a new report, JPMorgan analyst Marko Kolanovic weighed in on the current environment for equities, gold and oil, and discussed the options that central banks have moving forward.

Kolanovic sees sentiment deterioration and fundamental selling from hedge funds, pensions, wealth funds and retail as the biggest near-term risks to the S&P 500. He sees elevated volatility, deleveraging, rotation out of momentum stocks and weak market sentiment as headwinds as well.

While the SPDR S&P 500 ETF Trust SPY is down 9.3 percent year-to-date, the SPDR Gold Trust (ETF) GLD has surged 16.6 percent so far in 2016, and the iPath S&P 500 VIX Short Term Futures TM ETN VXX is up an incredible 44.2 percent.

Kolanovic noted that JPMorgan has been advising investors to increase their exposure to gold, cash and volatility since late 2015. He believes that gold will continue to benefit from global recession concerns.

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Finally, Kolanovic added that falling stock markets serve as the best answer to the question of whether low-priced oil is good for the economy.

He believes that the Federal Reserve has been too concerned with inflation in the past year and a half and has placed unnecessary pressure on emerging market economies, producing a “negative wealth effect” around the world that “could be comparable to that of the 2008/2009 crisis.”

For now, Kolanovic urges the Fed to pause any plans for additional rate hikes.

Disclosure: The author holds no position in the stocks mentioned.