Oil at $150 won’t cripple economy and market: JP Morgan’s Marko Kolanovic

JP Morgan’s Marko Kolanovic predicts oil will soar, but so will stocks.

Kolanovic, who is the company’s chief global markets strategist and co-head of global research, believes the U.S. economy is strong enough to withstand oil prices as high as $150 a barrel.

“There could be potential new oil spikes, especially given … the situation in Europe and the war, so we wouldn’t be surprised,” he told CNBC’s “Fast Money” on Tuesday. “But it could be a short-lived spike and eventually kind of normalize.”

WTI crude is trading around its highest level in three months, settling 0.77% higher at $119.41 a barrel on Tuesday. Brent closed at $120.57. The bullish move came as Shanghai reopened after a two-month Covid-19 lockdown, opening the door to higher and more bullish demand.

“We think the consumer can handle oil at $130, $135 because we had it from 2010 to 2014. Inflation adjusted, it was basically the level. So we think the consumer can handle that” , said Kolanovic, who won the honors. of an institutional investor for accurate forecasts for several years in a row.

Its base case is the United States and the global economy will avoid a recession.

But at a financial conference last week, JPMorgan Chase Chairman and CEO Jamie Dimon told investors he was preparing for an economic “hurricane” that could be “a minor hurricane or Superstorm Sandy.”

Kolanovic maintains that it is essential to be ready for all possibilities.

“We expect some downturn,” he said. “Nobody says there are no problems.”

The official year-end target for his company’s S&P 500 is 4,900. But in a recent note, Kolanovic speculated that the index would end the year around 4,800, still on par with the all-time highs reached on January 4. Right now, the S&P is 16% below its all-time high.

“We don’t think investors will stay in cash”

“We don’t think investors are going to stay in cash for the next 12 months, you know, waiting for this recession,” Kolanovic said. “If we keep seeing [the] that consumers, especially on the service side, resist – which we expect – then we think investors will gradually return to equity markets.”

Kolanovic’s main call is still energy, a group he’s been bullish on since 2019.

“In fact, valuations have fallen despite the share price appreciation,” Kolanovic said. “Revenues are growing faster, so multiples are actually lower now in energy than they were a year ago.”

He’s also bullish on small caps and high beta tech stocks that have been crushed this year.


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