The top stock strategist at JPMorgan thinks investors should stop buying the dip as the impact of the Federal Reserve’s rate hikes looms on the economy, corporate earnings and share prices. “We believe further market and economic weakness could result from central bank tightening,” Marko Kolanovic, the bank’s chief global market strategist, said in a note on Wednesday. “We believe that a retest of previous lows in equity markets is likely as there could be a significant reduction in corporate earnings, at a time of higher interest rates (implying lower P/Es and lower prices in relative to 2022 lows); and we tend to think that this market decline could occur between now and the end of the first quarter of 2023.” After falling into a deep bear market earlier this year, the S&P 500 has since ticked higher due to investors that the Fed will slow the pace of its rate hikes soon, reducing pressure on the economy. The benchmark is still down 17% for the year, even with the recent recovery. “Our view of risk markets in 2023 is 2 periods: market turmoil and economic decline that will force interest rate cuts, followed by economic and asset recovery,” Kolanovic said. “However, the critical parameters of this market path will be the depth of the correction The pivot encourages the Fed, and the point of time next year that this pivot occurs.” The Fed is scheduled to raise rates again at its December meeting, but a hike is expected n less than half a percentage point, down from previous increases of three-quarters of a point. Kolanovic gained a following by telling clients to buy early the pandemic dip in stocks in 2020, correctly arguing that the extraordinary fiscal and monetary stimulus being implemented would turn the market around. But the strategist was too supportive heading into this year. Investors are right to buy advice on the pullback in the second half of this year, but now rethinking that opinion. “Until late summer this year we thought that corporate and consumer resilience would be able to withstand the dramatic increase in interest rates, wealth destruction, and global geopolitical uncertainty,” he wrote. “As the expected peak in short-term interest rates moved from 3% to 5% (Terminal Fed Funds) and prospects for geopolitical de-escalation soon faded, we abandoned our short-term positive outlook.” Kolanovic is not bullish on bitcoin or its effects on investor sentiment. “The recent crisis of crypto schemes is unlikely to end, and its demise will put further pressure on risk perception and consumers,” the report says.