J.P. Morgan's head quant said Wednesday that a U.S.-China trade deal could head off a "Trump recession" and ignite a powerful rally in value and high beta stocks.

Marko Kolanovic, global head of quantitative and derivatives strategy, said in a note that he is "cautiously positive" on stocks, but his view carries risk because it depends on progress being made in the trade war.

The trade war has so far offset all benefits of fiscal stimulus and could lead to a global recession if it continues. That recession would be called the "Trump recession" because it would have been mainly caused by the trade policies of President Donald Trump's administration, he noted.

If the trade battle were to end, Kolanovic expects there would be a swift rally in the stock market.

"This would translate into a quick ~5% rally in broad markets, and a 10-20% rally in value and high beta. As a strong market and avoiding a recession would boost re-election odds, it would only be rational to expect this outcome," wrote the analyst.

"The impact of the trade war was particularly negative on segments that were its intended beneficiaries — such as manufacturing (autos, electrical equipment, etc.), smaller domestic companies, steel industry, etc," he noted. For instance, U.S. Steel has fallen 75% since the start of the trade war.

But segments that might not do well include defensive and low-volatility segments, like low-beta stocks, utilities, REITs and staples. Those sectors are "very expensive and might be poised to underperform in both positive and negative trade scenarios."