Watch out for this stock market rally as it serves as a reminder of what led to the 2008 crisis, says JPMorgan Asset Management CIO

A glass office building at dusk, with the JPMorgan logo in white against a black background in its top corner.

JPMorgan Hong Kong office.JP Morgan

  • The ongoing stock market rally is the calm before the storm, according to the CIO of JPMorgan Asset Management.

  • Bob Michele told CNBC that current market conditions reminded him of the period from March to June 2008.

  • “We see things that you only see in a recession or when you find yourself in a recession,” he said.

Investors should be wary of the ongoing stock market rally as it does not reflect looming economic risks and is reminiscent of the months leading up to the 2008 financial crisis, according to the chief investment officer of JPMorgan Asset Management.

Bob Michele told CNBC on Friday that current market conditions reminded him of the March to June period in 2008.

“We’re seeing things that you only see in a recession or when you find yourself in a recession,” Michele said, referring to the Federal Reserve’s aggressive interest rate hikes, credit crunch caused by the stress of the banking sector, commercial real estate risks and the inverted bond yield curve, widely seen as an indicator of recession.

He also pointed to the series of regional bank collapses in recent months, with JPMorgan taking over First Republic Bank after it failed – as it did with investment bank Bear Stearns in March 2008.

“The markets saw it as, there was a crisis, there was a political response and the crisis is resolved,” he told CNBC, referring to market events in 2008. “Then you have had a steady three-month rally in the stock markets.”

Michele’s warning comes as the S&P 500 bear market is over, setting the stock market up for another bull market. The threshold was reached on the back of better-than-expected corporate earnings, a resilient economy and labor market, and the expectation that the Fed will suspend rates at its meeting this week.

Trends since 1980 suggest recessions tend to start more than a year and a month after the U.S. central bank’s last interest rate hike, Michele said. The Fed raised rates for the 10th consecutive time last month and has taken them from near zero to over 5% since last spring in a bid to rein in historically high inflation.

He thinks it would be a “miracle” if the US economy avoided a recession once the Fed’s rate hike campaign ended.

Read the original article on Business Insider

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