Investors should buy the dip in stocks as markets can withstand higher interest rates, JPMorgan's quant guru says

The stock market has risen over the last year, helping to break the 36,000 barrier.

IANS News Agency

The quant-guru says that investors should buy the dip in US stocks.
He thinks the market will be able to absorb the rise in interest rates.
The Fed minutes caused a decline in risk assets.
Our daily newsletter is called 10 Things Before the Opening Bell.

The stock market decline is a buying opportunity for investors according to a Monday note from a quant-guru.

The Federal Reserve's December meeting minutes showed a pivot towards interest rate hikes and a reduction in its balance sheet, causing investors to jump into risk-off mode. The signal of a tightening Fed contributed to the collapse of speculative high growth stocks.

According to the note, the stock market will do well despite the rising interest rates, and that the pace of Fed hikes will likely be gradual and at a pace that risk assets should be able to handle.

He said that higher bond yields should not be a problem for the stock market, and that investors should buy the dip in US stocks.

The Omicron variant of the coronaviruses will prove to be a positive for risk assets, as it will speed the transition from epidemic to endemic with a lower human toll.

The idea that Omicron is less deadly than other versions is supported by the fact that hospitalizations remain below previous peaks.

There are downside risks to first-quarter growth due to the surge in Omicron cases, but a roll-over in cases in the coming weeks could help boost second-quarter growth, according to the note.
"As this wave fades, it will likely mark the end of the epidemic, as Omicron's lower severity and high transmissibility crowds out more severe variant and leads to broad natural immunity," he said.

Business Insider has an original article.