In recent weeks, JPMorgan has turned decidedly sour on the US equity market: one month ago, on March 3, JPM announced that “for the first time this cycle”, it has gone underweight stocks.

Equities, credit and commodities have all rallied in the last three weeks, as some of the immediate threats to the world economy have faded from attention, possibly only because the bad earnings season has wound up. But, to us, the fundamentals of growth, earnings and recession risk have not improved, and if anything have worsened. We remain wary of the near-empty ammo box of policy makers.

Our 12-month-out US recession odds have risen to 1/3, while equity-implied odds have instead fallen to near 1/5. But even with no recession this year or next, we see US earnings rising only slowly by low single digits and see little to boost multiples. The eventual recession should bring US stocks down some 30%, creating a strong downward risk skew to returns over the next few years.

We use the rally in stocks to sell it and go underweight stocks, versus HG corporate bonds and cash. The strong rebound of the past few weeks does create near-term momentum, and thus keeps our first UW small.

To be sure, the continued bounce since the JPM call has not been exactly reassuring of the forecast’s accuracy. However, what is surprising is that when faced with unpalatable price action, sellside researchers usually flip their call quickly.

Not in this case, because in a surprisingly candid piece released overnight, JPM’s Jan Loeys doubles down, and after asking rhetorically “Can central banks really save the day, or cycle?”, his answer is no. In fact, after saying now is the time to sell stocks, JPM’s head of global asset allocation is now even far more concerned about the over economy where his biggest concern is that central banks are powerless to stop the “collapsing productivity growth.”

Loeys begins as follows: