Good news (again). Marko Kolanovic is still bullish – or if not “bullish” at least “constructive.”

The doomsday crowd was dismayed back on February 1 when Marko suggested that recent volatility wasn’t sufficient to trigger the type of systematic unwind he’s been variously warning about for years and to be sure, Kolanovic was wrong. Just a day later, an above-consensus AHE print underscored upside Fed risk, exacerbated fears about the bond selloff, and sent stocks sharply lower. Then, on Monday, February 5, the bottom fell out, triggering the dreaded VIX ETP rebalance avalanche and the largest VIX spike in history.

After a mea culpa, Marko suggested that the systematic de-risking had likely run its course and on February 9, his colleague Nikolaos Panigirtzoglou gave what amounted to an “all-clear” signal. The timing of Panigirtzoglou’s note (3:30-ish ET) was fortuitous and might well have helped catalyze the late Friday rally that set the stage for the buying spree that unfolded the very next week.

In the weeks that followed, Kolanovic continued to suggest the near-term risk from rules-based selling was effectively nil, and on February 22, he underscored the point again with this:

In terms of systematic selling, this is largely over. In fact our models show that volatility targeting strategies may now start very slowly rebuilding their equity positions. One should also keep in mind that most pension funds rebalanced at the end of January, and global markets are now ~5% lower from that point (~90th percentile by size of the drop).

Fast forward to this week and Kolanovic and Panigirtzoglou are out with an asset allocation update and long story short, they’re reinforcing the Goldilocks narrative.

“Our macro views remain constructive: growth momentum is still robust and above-trend (despite some moderation), inflation is normalizing but unlikely to see a dramatic uptick, and the Fed will continue to tighten policy but remain accommodative,” they write, in a note dated March 8. “Without a clear threat yet to end this cycle, our asset allocation remains pro-cyclical and OW equities vs broad fixed income.”

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