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Equity markets have regained some ground in recent weeks after being pressured by concerns about the banking sector. According to Marko Kolanovic, strategist at U.S. bank JPMorgan, that recovery movement will come to an end in the coming months.

Equity markets have been through a turbulent period. With the banking crisis in the United States and the problems at Credit Suisse, many investors had fled to the exits in March. Now calm seems to have returned to the markets. The question is for how long?

Details: Equity markets have begun a recovery after they were pressured by , including and Signature Bank, and .

  • The S&P500 finally gained 7 percent during the first quarter of this year, after plunging about 20 percent in 2022.
  • The Nasdaq shot up more than 15 percent during the first three months of 2023. In 2022, the tech index dropped some 30 percent.
  • In Europe, the posted a gain of about 13 percent after losing about 10 percent last year.

Bleak outlook

Outlook: Kolanovic expects equity markets to plunge deep into the red again in the coming months. "There is not much logic behind the recovery movement in recent weeks," he warns.

  • Among other things, the strategist expects rising oil prices and a slowdown in growth to push equity markets back toward the 2022 lows. "In addition, the Fed has indicated it has no intention of cutting interest rates this year," he echoes.
  • He further warns that the banking crisis is far from over. "The VIX index(an indicator of volatility in the markets ed.) has dropped to less than 20 points, indicating that investors believe the problems in the banking sector are under control. This is the calm before the storm," it sounds.

Kalonovic's analysis is in line with that of Jamie Dimon, the CEO of JPMorgan. In his annual letter to shareholders, he writes that the banking crisis caused by the collapse of Silicon Valley Bank and Signature Bank is not over.

  • "And even if this crisis has nothing to do with 2008, it is not easy to determine when it will end," Dimon said.
  • He further warned in his letter that "we have evolved from a savings surplus to a savings deficit," which he said will result in structurally higher inflation and consequently higher interest rates.

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