The chief global strategist of JP Morgan Asset Management advised investors to focus on value stocks, sell cryptocurrencies, and avoid Bitcoin.
Summary
You need to stay away from Bitcoin and cryptocurrencies, according to JP Morgan
David Kelly, the chief global strategist at JP Morgan Asset Management, said investors should offload their investments in cryptocurrencies, Bloomberg reports.
The JP Morgan analyst’s prediction came after Fed Chairman Jerome Powell‘s Aug. 26 speech that appeared to prelude new rate hikes to combat rising inflation.
Kelly urges investors to move toward high-value-added stocks and not think short-term for their investments, but rather medium- to long-term:
“The economy has one foot in recession and the other on the banana peel now. Be sure to overweight U.S. and international value, as well as stocks with relatively low price-to-earnings ratios.”
These recommendations of his are mainly driven by Powell’s speech in Jackson Hole, which spoke of the need to continue with the high rate policy to counter inflation, after the two consecutive 75 basis point hikes made in the last two Federal Reserve meetings:
“The Federal Reserve is overestimating the strength of the U.S. economy because they feel guilty that inflation has risen on their watch.”
On the other hand, Powell’s words left little room for imagination and resulted in heavy declines in major U.S. indices:
“We are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored. We will keep at it until we are confident the job is done.”
For this reason, the JP Morgan analyst said it would be better to focus on value equities or the long-duration bond and avoid speculative products such as cryptocurrencies.
Kelly stated:
“Make sure you overweight U.S. and international value, as well as stocks with relatively low price-to-earnings ratio.”
Inflation and the U.S. economy
Edward Moya, the senior market analyst at Oanda, said in a recent e-mail that such an aggressive approach by the Fed could also trigger an economic slowdown.
And about Bitcoin, he stated that:
“Bitcoin weakened after Fed Chair Powell didn’t blink with his reiteration that the Fed will tighten policy to bring down inflation. Risky assets are struggling as Powell’s fight against inflation will remain aggressive even as it will trigger an economic slowdown.”
On the other hand, in recent days JP Morgan’s CEO has warned of the risks of a real hurricane coming on the economic front, urging investors to prepare for the worst.
Despite this, some analysts, on the other hand, are convinced that after Powell’s words, Bitcoin may have found a place to restart. Oanda’s Edward Moya himself believes that Bitcoin, despite risks related to the economy, may have found its low point from which to restart. While John Toro, the chief investment officer of digital assets at Independent Reserve, believes that not Ethereum, but the entire cryptocurrency market, could be positively impacted by the upcoming Merge update, which will bring the Proof of Stake consensus method to the Ethereum blockchain.
