Investors are likely to revise their portfolios in favor of gold and tech stocks as those assets are expected to provide a buffer against the likelihood of a US recession this year, according to strategists at JPMorgan Chase & Co.
"The US banking crisis has increased demand for gold as a proxy for lower real rates as well as a hedge against a 'catastrophic scenario'," they wrote.
JPMorgan analysts also predict high demand for these instruments among institutional investors. In the first three months of 2023, the largest central banks added 228 tons to global reserves, the highest rate of purchases seen in the last 23 years.
Tech stocks also regained luster with traders. This year, the share of tech in global equities has climbed sharply, approaching the 2021 highs. Those speculators betting on tech companies prefer long positions. It means that investors are optimistic about the prospects of the tech industry.
The trade defined as "long duration" is expressed by an increase in long positions on gold and growth stocks, e.g. tech companies, and currencies while shorting USD. JPMorgan notes that the long duration strategy has become rather popular in recent months. In the event of a recession, such an investment strategy is likely to bring more gains. It could also limit the downside in a mild US recession scenario but offer plenty of upside in a deeper recession.