The market is ignoring ongoing US-Iran tensions, which is a mistake, according to JPMorgan's Marko Kolanovic.
Stocks have soared to record highs as tensions between the United States and Iran have eased, but J.P. Morgan's Marko Kolanovic says the market isn't pricing in "significant" geopolitical risk.
"A significant change to our outlook is the new geopolitical tail risk that emerged in the Middle East. ...We believe this tail risk is under-appreciated by the market and should be hedged," he said in a note to clients Wednesday. He believes the risk of more retaliation is higher given that 2020 is an election year in the United States, when political divisions, oil prices and the market can have an especially "significant impact."and the phase one signing of the U.S.-China trade deal takes center stage, but some are warning that tensions in the Middle East continue to simmer, and may soon reach a boiling point.
"A significant change to our outlook is the new geopolitical tail risk that emerged in the Middle East," Marko Kolanovic, global head of macro quantitative and derivatives strategy, said in a note to clients Wednesday. "We believe this tail risk is under-appreciated by the market and should be hedged."
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