A respected JPMorgan strategist reportedly is predicting that stocks will surge 40% in a return to normal quicker than anyone expects because social distancing is working and the coronavirus will soon be only a distant memory.
The economy could restart in a “number of weeks” and the S&P 500 could be back to record levels by early next year, JPMorgan’s Marko Kolanovic said in a note to clients, CNBCPro reported.
The global head of quantitative and derivatives strategy said he sees stocks entering an end-of-the-month rebalancing, and notes that equities have underperformed bonds.
“Over the next 10 days we will get into the month-end rebalancing period, which would prompt significant buying of equities," said Kolanovic, who is widely followed on Wall Street.
"The stark underperformance of equities vs. bonds MTD leaves fixed-weight asset allocation portfolios ~4% underweight equities, which suggests they are likely to do a large rotation out of bonds and into equities to rebalance back to target weights,” TipRanks quoted him as saying.
Meanwhile, President Donald Trump said on Tuesday that he wants to wind down “social distancing” and reopen the U.S. economy after his 15-day strategy to slow the spread of the virus ends next week.
“I would love to have it opened up and just raring to go by Easter,” he told a Fox News “virtual town hall.”
White House senior economic adviser Larry Kudlow acknowledged that the administration doesn’t have the power to order a return to work. “We don’t exercise any monolithic authority but guidance is very important,” he told reporters on Tuesday, Bloomberg reported. “Public health also requires a good economy,” Kudlow said. “It’s not ‘either-or.’ The two have to work together.”
However, Wells Fargo Securities senior economist Mark Vitner sees slow going when work finally does resume. “Economic activity will ramp up fairly slowly as supply chains will take some time to normalize,” he said.
Vitner gives Trump the benefit of the doubt and says Trump is mainly trying to get the discussion going: “The president is right in starting the discussion about getting back to work. Establishing mileposts, benchmarks and criteria for ending the shutdowns and returning to work will remove some of the uncertainty present in the economy today,” he said.
That’s exactly the point, said Stephen Moore, an ally of Trump’s and advocate of an early return to work by America.
“I like the idea of a date certain,” he said. “One of the reasons the stock market has crashed is that people don’t know how long this is going to last,” said Moore, whom the president once considered nominating to the board of the Federal Reserve and is now an economist with FreedomWorks.
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