JPMorgan is advising its clients to increase their exposure to cash and gold, while reducing their exposure to equities and bonds. The bank’s analysts believe the equities rally is “misplaced” given the market’s failure to price in the risk of failure to raise the debt ceiling. They cite elevated recession risk, stretched valuations, high rates, and tightening liquidity as key reasons for their stance. As a result, they increased JPM’s cash allocation by 2% and cut exposure to stocks and bonds by 1% each. They also rotated from energy to gold, citing its safe-haven demand and potential as a debt ceiling hedge. Investors should take note of JPMorgan’s advice and adjust their portfolios accordingly.
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