‘I’m getting more and more desperate’: JPMorgan’s chief strategist on why investors should reduce risk during market turmoil

• Indices rose on strong economic data and a sharp decline from the Fed.
• However, with markets looking at a milder decline, the potential downside poses a bigger risk to investors, David Kelly says.
• He says Americans should dial back risk and put money away from stocks and value.

Strong economic data and a major rate cut last month boosted sentiment, but investors should be wary of increasing risk, according to David Kelly of JPMorgan Asset Management.

The firm’s chief global strategist says the promise of an easy stay has encouraged Americans to pour into risky assets at a time when they shouldn’t be.

“I will say that while I think this is good for the equity market, I’m getting more and more frustrated with the fact that the equity market is continuing to price easily,” Kelly said. told Business Insider.

He said that while the market prices are going down slowly, the prices are going up, which means that the shock of the market can cause the prices of goods to go down.

“The markets are more volatile and more volatile, and because they’re more volatile and at higher valuations, they’re more risky,” he said.

At the same time, the average wealth of Americans has increased. According to Fed data, the total wealth of American households has grown by $50 trillion over the past five years. That means many middle-income families who couldn’t afford to retire a few years ago now can, Kelly says.

As a result, investors should not take more risk than they need to, he says.

“They should call the risk back. You don’t need to increase the risk if you have enough money to do the things you want to do,” Kelly said.

Kelly was particularly cautious about keeping money tied to high-flying growth stocks.

He said: “That’s when I think common sense will dictate that investors take a little risk off the table, allowing the risk to accumulate on the table.”

Instead, he encouraged investors to rebalance their portfolios, pulling funds out of growth stocks and into value stocks, international bonds and other options.

Kelly said the market has been headed for a soft spot for a long time, and Friday’s blockbuster jobs report strengthened that case. The report showed a drop in the unemployment rate from 4.2% to 4.1%, while adding 254,000 unemployed workers, up from the previous estimate of 150,000.

The strong report all but dashed hopes for another big rate cut next month, and investors were quick to cut the odds of a 50-point rate cut from 33% to less than 1%, according to the CME FedWatch Tool.

Kelly admitted, however, that the data leaves room for error, so it’s possible that last month’s activity appeared to be weaker than it actually was and this month appeared to be stronger. more than the truth.

Regardless, he says the report confirms that the US has a healthy, strong labor market and that the economy is “on a very good path.”

Kelly expects the Fed to cut another 50 basis points during its next two meetings, and another 100 next year.

Back in August, when a dramatic increase in unemployment led to a global sell-off, Kelly told Business Insider that the Fed needed to do more to announce its confidence in the economy.

Now, he says the Fed should continue to show its confidence, and show that it can take its time to reduce interest rates.

“The more the Federal Reserve appears to be taking its time and not worrying too much, the more it will do to support confidence,” he said.