Marko Kolanovic, chief market strategist at jpmorgan, warned that he expects U.S. stocks to come under pressure in the coming months as U.S. corporate pricing power weakens, which tends to dent profitability, but he is bullish on global energy stocks.
The well-known strategist believes that falling inflation may force companies to have less pricing power for goods, a headwind that could weigh on U.S. stocks in the final months of 2023 .
Kolanovic warned in a note to clients on Monday that sectors such as retailers, automakers and airlines will be hardest hit by cooling inflation. These companies have raised prices over the past two years as inflation has picked up.
At the same time, Kolanovic once again warned about the delayed impact of rate hikes.
After last week's worst weekly sell-off since March, stocks snapped a four-day losing streak on Monday, with the S&P 500 up 0.4 per cent. The stock market has been in a state of flux since August as investors worry about the economic impact of a continued rise in interest rates.
Bullish on global energy stocks
While Kolanovic maintained his defensive stance on the broader U.S. stock market, J.P. Morgan raised its rating on global energy stocks to "overweight," citing upward momentum in oil prices over both the short and long term.
Last week, jpmorgan Chase said oil prices could climb as high as $150 a barrel as the energy supercycle returns and urged investors to buy energy stocks.
The bank picked 13 "global energy stocks to own," which it calls the "super Cycle club." Companies recommended include ExxonMobil, Marathon Oil and Baker Hughes, as well as Cenovus Energy Inc., a Canadian oil sands producer.
Globally, the bank also recommended buying Total Energy, Saudi Aramco, petrochina and Australia's Beach Energy Ltd.
" re bullish on global energy stocks ." Kolanovic wrote in his weekly report Monday. He acknowledged that energy stocks have struggled to keep pace with surging crude oil prices, which have vastly outperformed them. But jpmorgan expects that to change as higher oil prices draw more investors into stocks.
In terms of global equities, Kolanovic said Japanese stocks are likely to outperform as global policy tightening spurs long-term interest from overseas investors.
At the same time, the strategist also said that Chinese stocks are now heading for the "buy zone" , citing the upcoming National Day Golden Week, which will boost October economic data, and the expected new stimulus measures from the Chinese authorities.