JPMorgan's Kolanovic: Time to start adding risk as innovation stocks have fallen too far

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JPMorgan analyst Marko Kolanovic advised investors to start adding risk to their portfolios, arguing that former high-flying innovation and tech stocks have now fallen far enough to present buying opportunities.

"In our view, the correction in bubble sectors is now likely finished," the firm's chief global markets strategist said in a note issued Thursday.

In addition, Kolanovic predicted that geopolitical risk will likely fade "in a few weeks' time," providing another tailwind for a market recovery.

"Markets may anticipate these turning points sooner, and we think it is time to start adding risk in many areas that overshot on the downside year to date," Kolanovic contended.

The closely followed analyst advised a selective approach to stock buying, underlining the fact that "not all assets are cheap." Specifically, he pointed to "expensive segments in megacaps, defensives and low-volatility stocks that are sensitive to rising rates."

That said, Kolanovic spotlighted "great opportunities" in sectors like innovation, tech, biotech and emerging markets, especially China.

"These segments are already pricing in a severe global recession, which will not materialize in our view," he said.

In addition, Kolanovic said he remained bullish on commodities, given the ongoing supply/demand imbalances in the sector.

To get an idea of how dramatically speculative tech stocks have fallen so far in 2022, look at the year-to-date performance of Cathie Wood's ARK Innovation ETF, which saw two-thirds of its holdings hit 52-week lows this week.