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Recession Fears in Small-Cap Market Is Exaggerated, Says JPMorgan’s Kolanovic

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Marko Kolanovic, alongside other JPMorgan Chase & Co. strategists, argues it’s time to buy beaten-down stocks like small caps after the firms priced in an economic recession unlikely to happen.

Source: Bloomberg

DXY down -0.37%, RT2000 up +1.94%

In a note to clients, Kolanovic stated that many market metrics such as the recent performance of high vs. low beta stocks and valuations of small caps have already priced in a recession.

Kolanovic further stated that equity market sell-off is overdone in their view and emphasized their call to buy the dip, more in cyclicals and small caps.

Stocks bounced back on Monday after concerns over Fed tightening sent equity benchmarks to one of their worst starts in years.

The Russell 2000 of smaller companies jumped more than 2%, extending a similar recovery from Friday. The index entered a beat market the prior week as a selloff from its record surpassed 20%.

Kolanovic noted that the investor fear of a Fed policy mistake is largely misplaced.

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