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JPMorgan Asset Management CIO says markets are headed for a "feel good period" before an economic slowdown.
- Investors should not lean into the fleeting rally next quarter, as a recession is looming, he said.
- "If we've been taught anything this past month, you may see it coming or you may not."
Markets are headed for a brief rally before an inevitable slowdown in the economy, JPMorgan Asset Management CIO Bob Michele says.
In an interview with Bloomberg on Friday, Michele says risk assets will rise in the next quarter as they did during the Great Financial Crisis in the mid 2000s when a slew of major banks failed as well.
"Having been an investor through the financial crisis, and [having looked at] that seminal moment when Bear Stearns and JPMorgan combined...The next quarter was great for markets. Equities went up 15% to 20%," Michele said. "High-yield credit spreads retraced a quarter and then the bottom fell out."
He added: "You could have a feel good period and then the reality of the cumulative lag catch up and slow the economy down."
Investors should not lean into the rally as gains will be fleeting, Michele said, adding that the US will enter a recession by year-end which will "pound away at the economy."
This will follow the Federal Reserve's continued interest rate hikes and quantitative tightening over the past year in an effort to bring down inflation.
"If we've been taught anything this past month, you may see it coming or you may not. You don't know exactly where it's going to hit," he added, nodding to the abrupt failure of several banks in March that caught markets off guard. "But once it hits, whatever you own, you own, and you have to hope that you own the stuff that recovers."