An analyst at JPMorgan Asset Management has advised investors to focus on valuations, invest in value stocks, sell crypto and stay away from bitcoin. “The Federal Reserve is overestimating the strength of the U.S. economy because they feel guilty about the fact that inflation has risen on their watch” he said.
JPMorgan analyst’s recommendations
Analyst, David Kelly, JPMorgan Asset Management has some advice for investors worried about a hawkish Federal Reserve on inflation.
Following Federal Reserve Chairman Jerome Powell’s speech Friday in Jackson Hole, Wyoming, he was quoted as saying:
The economy now has one foot in the recession and the other on the banana peel.
“We are taking aggressive and timely action to moderate demand to better align with supply, and to maintain inflation expectations. We will continue our efforts until we are satisfied that the job is done,” Jerome Powell said last week.
Warning of more volatility in the future, David Kelly stressed that investors should focus on defensive stocks and valuations rather than short-term guidance, including investing in value stocks, long-dated bonds and income-generating alternatives.
The analyst recommended investors sell crypto-currencies while avoiding large-cap tech stocks and bitcoin:
Be sure to overweight U.S. and international value, as well as stocks with relatively low price-to-earnings ratios.
Citing a high risk of recession, Kelly said the economy will be “more normal” by the end of next year. However, he cautioned that the real question is “how much damage does the Fed want to inflict on this economy?“.
The chief global strategist at JPMorgan Asset Management added:
The Federal Reserve is overestimating the strength of the U.S. economy because it feels guilty about the fact that inflation has risen on its watch.
David Kelly also said Monday that the U.S. economy will be “teetering on the brink of recession” until the Federal Reserve eases its fight against inflation. He expects the Fed to raise the federal funds rate to a range of 3.75 percent to 4 percent by the end of the year, up from the current 2.25 percent to 2.5 percent. “The Fed could then stop its hikes and hope that the economy will simply avoid recession“, he described.
JPMorgan CEO Jamie Dimon warned earlier this month that “something worse” than a recession could be coming. In June, the executive hinted at an impending economic hurricane, advising investors to be prepared.