JPMorgan's market guru, who called the rebound, sees 'limited reopening' of the economy soon

Published Tue, Apr 7 20208:40 AM EDT

Coronavirus cases in the U.S. are peaking sooner than people expected, according to a top JPMorgan strategist who was bullish two weeks ago before most on Wall Street, and that could lead the economy to open sooner than others think. "We believe we've seen a peak in new case growth in the US 3-4 days ago, and then deaths will peak in about a week, so we look for a limited reopening of the economy in 1-2 weeks," JPMorgan's Marko Kolanovic said in a note to clients recapping a conference call on markets from the firm's top research analysts. The quant is looking at smart thermometer data to get ahead of other forecasters, which he said is leading the official data coming out of hospitals by one to two weeks. The fast-spreading coronavirus has lead to an unprecedented time in financial markets, with a government mandated economic shutdown forcing social distancing. Stocks dropped violently into bear market in the past two months, causing the worst first quarters for the Dow Jones Industrial Average and S & P 500 on record. Recently, stocks have attempted a rebound due to Federal Reserve intervention and a record-breaking $2.3 trillion fiscal stimulus bill —but Kolanovic said the economy reopening depends solely on the virus. More than 360,000 Americans have been infected by the coronavirus and nearly 11,000 people have died from COVID-19, according to Johns Hopkins. Kolanovic projects about 70,000 coronavirus related deaths in the U.S., below the forecast 100,000. Data over the weekend that shows a slowing in the number of daily U.S. coronavirus cases, although it is still early to determine a lasting trend. "Most countries are now past the peak, which suggests that limited reopening of the economy may be weeks, rather than months away, and that some of the models based on official data are overly pessimistic," Kolanovic expounded. Right before stocks rallied, Kolanovic, who is the global head of quantitative and derivatives strategy and has a wide following on Wall Street for his calls, said that social distancing was working, the economy could restart in a "number of weeks" and the S & P 500 could be back to record levels by early next year if this early indicator is right. This was an extremely bullish call at the time two weeks ago and a day after what looks like could be the bottom if this rally holds. The S & P 500 is up about 9% since Kolanovic's call and the benchmark was set to add more to that call on Tuesday. JPMorgan expects the global economy to fall 11% in the first half of 2020, and then rise by 13% during the send half of this year. Regarding the recovery in stocks, Kolanovic is overweight equities and underweight government bonds. "We think we will be able to recover the losses in equities sometime next year," restated Kolanovic, who sees the coronavirus recession as uniquely deep and uniquely short-lived. Kolanovic's pre-pandemic price target was 3,400 on the S & P 500 for the end of 2020, he is now expecting to reach those levels in the first half of 2021. "We are positive on equities because equities globally have declined 20-50%, or around 35% on average, and we've seen significant de-rating and a positioning flush," Kolanovic added. "Earnings clearly will be impaired over the near term, but equities typically look significantly forward in time. The nearterm economic hit will be horrendous, but investors will focus on 2021 and even 2022." Kolanovic also said he recommends adding credit exposure, as credit is getting cheap. — with reporting from CNBC's Michael Bloom.

A man wearing a face mask takes a selfie at the Charging Bull statue near the New Stock Exchange.

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