JP Morgan’s Bob Mitchell issues dire warning on rally in risk assets, says recession is inevitable – Yahoo Finance
bob mitchellchief investment officer of JP Morgan Asset ManagementHas warned of an economic slowdown, saying that the markets are heading towards a boom before the inevitable recession.
In an interview with Bloomberg on Friday, Mitchell says risk assets will rise in the next quarter, just as they did during the Great Recession.
“Next quarter, we could see an uptick in risk assets. You can have a feel-good period, and then reality catches up,” Michel said. “If we’ve been taught anything this month, it’s that you may see it coming, and you may not.
During the interview, Michel speculated that the central bank could start cutting from September. He said many investors, including himself, are now cleaning up their portfolios so that they only hold assets that can withstand an economic downturn or thrive.
Mitchell advised investors to avoid leaning into the rally as gains would be fleeting, adding that the US will likely enter a recession by the end of the year.
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“We think a recession is inevitable by the end of the year,” he said.
“Being an investor during the financial crisis and seeing the critical moment when bear stearns and JP Morgan (NYSE:JPM) combined, the next quarter was great for the markets. Equities went up 15% to 20%,” Mitchell said. “High-yield credit spreads retreated a quarter, and bottomed out.”
“When it hurts, when we get into a recession, we’re expecting high-yield credits to go over a minimum of 800 (basis points),” he said during the interview. “Defaults could rise to around 6%.”
“I took five customer calls yesterday, and they were all about: What do we have in our portfolio?” Michelle said. “I want to use the next quarter to go through our portfolio and make sure we have the best quality borrowers.”
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Last month, Mitchell was quoted as saying that a recession is likely and the best investment strategy is to stick to high-quality bonds. He predicted that the entire Treasury yield curve would flatten to 3% by August.
Read further: Bond market pricing some kind of bearish but equity market still in denial, says Morgan Stanley strategist
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