(Bloomberg) -- A lot has happened since news of Marko Kolanovic’s abrupt exit from JPMorgan Chase & Co. last summer sent shockwaves across Wall Street.
The Federal Reserve cut interest rates for the first time in four years. Donald Trump captured the US presidency. The S&P 500 Index gained another 9%. And his former colleagues capitulated on their bearish views.
But to the celebrity strategist, who was among the last pessimists standing against this bull market when he left the business last year, not much has changed. US stocks face so many risks, from high concentration to geopolitical turmoil, that they’re still due for a substantial downturn, he says. The S&P 500 is trading above 6,000 and hit a new high two weeks ago, but Kolanovic sees it falling up to 1,000 points or more.
“I do think we’ll go back down in the 5,000s this year,” Kolanovic said on Bloomberg’s Odd Lots podcast. Potential turmoil from the new political climate could bring the gauge down “much lower into 4,000 — I think there’s some probability of that.”
The strategist has not announced plans for his next endeavor. But he still has a large following among investors. After his departure from JPMorgan, he joined social media platforms, including Elon Musk’s X.
While Kolanovic hasn’t changed his tune, this gloomy forecast looks timely with Big Tech stocks largely flat over the past six weeks, questions raging about US dominance in artificial intelligence, and concern that sticky inflation could force Fed officials to hold interest rates elevated for longer than originally expected.
Trump’s trade war is adding a new layer of uncertainty. US stock index futures slid on Monday after Trump announced tariffs on goods coming from Mexico, Canada and China in a move that threatens to upend global trade.
Turbulence Ahead
The declines come after worries last week around a cheap AI model from Chinese startup DeepSeek spurred a $1 trillion rout in US equities, with Nvidia Corp. losing $593 billion in market value in a single session, the biggest drop in US stock-market history. US equity benchmarks have since recouped most of those losses, but Kolanovic suspects there’s more turbulence ahead.
“It’s perhaps not over,” Kolanovic said. “We still have a few important earnings to come, so it remains to be seen what happens, maybe another week of earnings, whether there is any sort of follow through.”
Before his departure from JPMorgan, Kolanovic was one of few vocal stock market skeptics left on Wall Street following a blistering rally that started in October 2022. He consistently warned of mounting risks, from a slowing economy to geopolitical tensions to slowing momentum from the high-flying stocks spurring the market’s gains.
Those headwinds remain. Kolanovic cautions that from a technical perspective, historically high concentration makes stocks vulnerable to a sharp reversal. The unprecedented imbalance between the 10 biggest names and the rest of the equity market can’t hold, he said, and a cyclical downturn to “purge and normalize” soaring valuations is likely.
“In 2000, they were this high and we know how it ended,” Kolanovic said.
Of course, pinpointing when these risks will start to bite is the tricky part, he added, acknowledging that he was caught on the wrong side of the rally. “A lot of people got burned, myself included,” he said. “We were more negative last year and basically the market has this tremendous momentum, so the timing is going to be a challenge.”
Feel The Pain
Traders have gotten glimpses of how much pain such an event could set off, from the DeepSeek-triggered slide last week, to the unwinding of the short-term yen carry trade in August that unleashed a global selloff.
Kolanovic, who previously was at Bear Stearns, joined JPMorgan when it took over that firm in 2008. The strategist came to the US from Croatia in the 1990s to study at New York University and received a Ph.D. in theoretical physics in 2003, which is the basis for his quantitative prowess.
“There was a lot of coding, there was a lot of modeling, there was a lot of trying to understand why one thing leads to another,” he said. “I really never used any formula from physics in finance, but the way of thinking is similar.”
Kolanovic earned his reputation as a market soothsayer with prophetic calls on 2015’s stock slump, 2018’s “Volmageddon” volatility blowup, and the post-Covid recovery rally. He was nicknamed “Gandalf” for his prescient predictions, but his powers of foresight seemed to desert him in the two-year stretch leading up to his departure from JPMorgan. He was steadfastly bullish in much of 2022 as the S&P 500 sank 19% and strategists across Wall Street lowered their expectations for equities, and remained bearish through double-digit rallies in 2023 and 2024.
Other prominent strategists on Wall Street who have left their posts in the past have gone on to open their own shops. Among them are former Merrill Lynch & Co. forecasters Charles Clough, Richard Bernstein, and David Rosebnerg, and former Morgan Stanley equity strategist Adam Parker.
For now, Marko continues to share his perspectives on X.com to his following of nearly 15,000 users that he accumulated quickly after creating his account, along with posts on LinkedIn. But when asked on Odd Lots if he has plans to join TikTok and make market forecasts, he replied “never.”
