The strategist considered the rally as an opportunity to “moderately reduce” the bank’s overweight stance on stocks, while he remains overweight commodities “given potential tailwinds from easing COVID restrictions in China, and as a hedge for geopolitical risks and inflation,” the note said.
Despite the trim in equity exposure, Kolanovic still sees upside for stocks heading into December followed by a more challenged outlook in 2023.
“We remain of the view that equities continue to squeeze higher into December but do see an increasingly challenging growth backdrop in 2023, assuming central bank policies remain restrictive. On the demand side, tightening US financial conditions, decline in real wages, strengthening US dollar, softening housing market, and knock-on restrictive central bank policies across the world are disinflationary,” he explained.
