Half Mag / Half Zine

Marko Kolanovic, chief global markets strategist at JPMorgan Chase & Co, believes Wall Street’s recent sell-off presents a buying opportunity.

Four days after reaching an all-time closing high, the S&P 500 has fallen 2.6%, an inauspicious beginning to a new year fraught with inflation worries, a more hawkish Federal Reserve, and spiking infections of the COVID Omicron variant.

But calling the pull-back in risk assets “arguably overdone,” Kolanovic believes that going forward, there is “more room for the Fed to surprise on the dovish than hawkish side.”

Further, he believes that while Omicron presents some downside risk, he also sees it becoming a positive for markets.

“After all, if a less severe and more transmissible strain quickly crowds out more severe variants, it could transform a deadly pandemic into something more similar to a seasonal flu,” Kolanovic wrote.

While acknowledging the possibility of a dip in large cap stocks pulling down the broader market, the note says that “despite this week’s volatility, there is a good chance we are coming to the end of this period of fragile sentiment, although it may take a few weeks for the market to process the Fed’s incremental changes and Omicron’s beneficial (yes, beneficial) impact as the more dominant, less severe strain.”