- Investors need to overweight US value and stocks with low price-to-earnings ratios.
- JPMorgan’s blockchain lead says most cryptos are junk.
JPMorgan’s chief global strategist, David Kelly, has offered his suggestions for crypto investors worried about the Fed’s latest hawkish stance. He advised the investors to buy value that will last for the long term and forget about short-term profits. On Friday, the equity markets went on a tailspin following Fed Chair Jerome Powell’s statement that the apex bank will still increase rates and keep doing so to curb inflation, regardless of the risk it poses to the economy.
The statement nullified any hope of a dovish pivot over the short term, fueling predictions that this year’s bear market is far from over. Part of Powell’s speech at Jackson hole reads;
the economy has one foot on a banana peel and the other in a recession. Thus, the best position to take now is to consider valuations.
He suggested that investors overweight US and international value and stocks with relatively low P/E ratio (profit-to-earnings ratio). Markets have been declining since the beginning of the year on fears of tighter monetary policies to curtail inflation. Inflation, the highest it has been in forty years, is gradually pushing the economy into recession.
Bulls took comfort in the possibility of inflation highs and the Fed’s reduction in the pace at which it is raising rates. The performance of growth versus value stocks has been a reflection of those fears and hopes. In comparison, value stocks performed better than growth stocks in the first half of 2022. The latter is performing better than the former in the year’s second half so far.
However, Powell’s Friday speech caused value stocks to regain their pole position. Kelly advised investors to sell crypto and avoid large-cap tech stocks and Bitcoin. On Monday, Bitcoin traded at sub-$20,000 levels, while the value of MEME (a meme stock ETF) has declined by nearly 20 percent in the last two weeks, trading around last month’s lows.
Kelly predicts greater volatility and a high possibility of a recession. However, he also expects the economy to feel more normal by the end of next year. The question is, will the Fed have inflicted too much damage on the economy before then? The global strategist added that the Fed is exerting too much effort to reduce inflation, hurting the economy significantly. He further said the central bank is overestimating the US economy’s strength.
Most cryptos are junk – Umar Farooq
Umar Farooq, CEO of Onyx digital assets (JPMorgan’s blockchain division, believes that there aren’t complete representations of the use cases for blockchain technology, including crypto, yet. While speaking at a seminar organized by Singapore’s financial regulator, the Monetary Authority of Singapore, Farooq said only a few dozen tokens make sense; most are junk.
Hence, he predicted that most of them would fade away soon. He also said regulation hasn’t caught up while the use cases haven’t fully developed. However, he forecasts that large institutions that catch up on the technology will win big once the proper regulation is in place.
Farooq further said that the current Web3 space is still fueled by speculation and doesn’t provide solutions yet. But he admitted that these conditions are necessary for the industry to mature. It is worth noting that JPMorgan hasn’t released any blockchain-related products. Instead, it has been developing its blockchain infrastructure.