Marko Kolanovic

Crystal Mercedes | CNBC

There’s a new opportunity emerging in this record stock market environment due to the “largest divergence ever” between so-called “value” stocks and “defensive” stocks, according to one of J.P. Morgan’s top strategists.

J.P. Morgan Chase markets analyst Marko Kolanovic explained his latest thinking in a note to investors, as he sees the S&P 500 rising to 3,200 over the next year. That would represent an increase of about 6%, which Kolanovic noted is “quite a bit lower rate of returns … given that the S&P 500 returned over 20% in 6 months.”

“However, we think that the unprecedented divergence between various market segments offers a once in a decade opportunity to position for convergence,” Kolanovic said.

He said he identified a record disparity “between value/cyclical stocks on one side, and low volatility/defensive stocks on the other side.” What’s more, he says the separation “is much more significant even when compared to the dot com bubble valuations of late ’90s.”

“This rotation would push significantly higher all the laggards such as small caps, oil and gas, materials, and more broadly stocks with low P/E and P/B ratios,” Kolanovic added.

– CNBC’s Michael Bloom contributed to this report.



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