Marko Kolanovic Is Back With a Warning for Stocks

SPEAKER_2 (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

Joe, in your history of being a financial journalist, what are you most proud of in terms of coining phrases? Oh. I gave you a hint just then because I assume it's mint the coin.

Joe Weisenthal (0:37)

Yeah, oh, good one. Yes, sure, mint the coin, that's right.

Tracy Alloway (0:40)

Okay. Thank you, yes. So I have a few. I have China's Great Ball of Money.

Joe Weisenthal (0:46)

I like how you're like, what are you most proud of? And this is going to be my saying, it's what I'm proud of. But keep going, keep going.

Tracy Alloway (0:52)

Thank you. You called me out. Europe's sovereign bank loop, although no one believes that I invented that one, and Flows Before Pros, which has come up quite a bit on this podcast. So the idea that when valuations are extremely high and everyone's buying everything no matter what the price, that it's momentum that matters more than fundamentals. Today, I'm very happy to say we are going to be speaking to a pro who knows Flows.

Joe Weisenthal (1:20)

How's that? Extremely well done, Tracy.

Tracy Alloway (1:23)

Thank you.

Joe Weisenthal (1:24)

Excellent setup. Of course, I appreciate all of the Tracy neologisms. Man, what a time in the market to be talking about Flows, to be talking about momentum, et cetera. I feel like I, you know, it's always chaotic. It's always uncertain. You'll never get an answer. But man, things feel really noisy right now.

Tracy Alloway (1:42)

They feel super noisy. So we are recording this on January 30th. It is a week that has seen a very sharp selloff in tech stocks, thanks to anxiety over DeepSeek coming out of China. We're going to talk about that. And more generally, we're just going to talk about what's going on in the market right now, how investors might be handling it, and how the market structure might have changed over the years. And as I said, I'm very excited because we do have the perfect guest, the pro who knows his flows. He has a lot of nicknames actually, Gandalf being one of them as well. Actually, I didn't realize one of our colleagues at Bloomberg kind of coined that name for him. But of course, we are speaking with Marko Kolanovic. He is JP Morgan's former Chief Global Market Strategist and Co-Head of Global Research. And now he's with us to talk about the market. And Marko, thank you so much for coming on Odd Lots.

Marko Kolanovic (2:39)

Thank you so much for having me.

Tracy Alloway (2:40)

I'm very excited. I know I've said that three times now. But I guess we should start with the recent sell-off, like the DeepSeek deep stock sell-off. There are all these superlatives that you can use to describe Monday's action, like the biggest single stock plunge in history in the form of NVIDIA, and like eight of the top ten biggest one-day drops in the S&P 500, etc., etc. And actually, as we're recording this on January 30th, Microsoft is down 6% after earning, so maybe the tech sell-off isn't over yet. But one of the interesting things about this week is there hasn't really been broad contagion. So most stocks in the S&P 500 were kind of like, meh, we don't care. When would you expect some of the anxiety over DeepSeek to maybe start having a bigger impact on the broader market?

Marko Kolanovic (3:34)

So, as you said, there was not much contagion. And if you look at the different stocks in S&P, many of them were actually up. And many even in the tech sector were up. If you look, for instance, Facebook Yesterday or Today, or a bunch of other names that sort of were perceived, that they might be sort of benefiting from the sort of open architecture type of things that can come at a cheaper price and can be still implemented in their business model when it comes to AI models. So it was fairly contained. I'm a little bit surprised just because there were like three or four names that really got hammered. And that can only be explained with a, not just with a panic, but some of the sort of forced selling, maybe coming from options.

If you're selling in the video puts for the past few years, you could make a good living out of it, but then you'll have a day like we saw this weekend. And basically you might get forced out of these positions and maybe have a catastrophic loss. So it was fairly limited. I'm a little bit surprised, just because we didn't really have a meaningful sell-off since last summer, sort of when we were at the back of Bank of Japan.