JPMorgan’s market guru says the Evergrande crisis is a chance to buy the dip in US stocks – and predicts the S&P 500 will surge 8% by year-end

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Marko Kolanovic is a well-known market analyst.
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  • JPMorgan’s market guru Marko Kolanovic said he’s bullish on stocks despite the Evergrande crisis.
  • He said the sharp sell-off on Monday, triggered by Evergrande’s looming default, was a buying opportunity.
  • Kolanovic and colleagues backed the S&P 500 to hit 4,700 by year-end, a rise of 8% from Monday’s closing price.
  • See more stories on Insider’s business page.

JPMorgan’s market guru has said the biggest stock sell-off since May, triggered by fears over Chinese property developer Evergrande, is a good opportunity for investors to “buy the dip.”

Marko Kolanovic – the bank’s head of quantitative research – and colleagues said in a note on Monday that they are still bullish on stocks despite a recent rough patch.

They backed the US S&P 500 to rise to 4,700 by the end of the year. That’s 8% higher than Monday’s closing price of 4,357.73.

Stocks around the world tumbled on Monday as investors panicked about the possible global impact of the looming collapse of China’s second-biggest property developer, Evergrande.

The developer owes more than $300 billion and has suppliers across China and investors around the world, fanning fears of global fallout.

The S&P 500 fell as much as 3% on Monday before paring its losses. It finished 1.7% lower, its biggest fall since May, which took the index to 4% below early September’s record high. The Dow Jones fell 1.78% on Monday and the Nasdaq 100 dropped 2.1%.

Kolanovic and his colleagues said they thought Monday’s sell-off was “primarily driven by technical selling flows… in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks.”

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They added: “Our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip.

“We remain constructive on risk assets and last week upgraded our S&P 500 price target, given expectations of a reacceleration in activity as the delta wave fades and better than expected earnings.”

However, Saxo Bank’s head of equity strategy said the pull-back in stocks would test the resolve of the “buy-the-dip” crowd.

Peter Garnry pointed to the rise in the gauge of expected stock volatility – the VIX index – as a sign that the sell-off may not be over. The VIX, often dubbed the fear gauge, rose from 20.81 to 25.71 on Monday, although it fell to 22.81 on Tuesday.

“The market is anxiously waiting for mainland Chinese investors to come back from holiday on Wednesday, and Thursday’s judgement day for Evergrande with two bond payments due,” Garnry said.