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Most risk assets, including stocks and corporate credit, are likely at their lows for this recession, JPMorgan strategists said on Friday.

Criteria including massive fiscal stimulus, recession-level pricing, and a reversal in asset allocation have been met, the bank said, justifying "adding risk selectively" over the coming weeks.

The biggest risk to financial markets remains the spread of the coronavirus in Europe and the US. Infection rates are "too high to say with confidence" that countermeasures will contain the outbreak by the second half of 2020, the team led by John Normand wrote in a note.

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The blistering pace that risk assets fell in recent weeks likely brought valuations to their floor, JPMorgan strategists said on Friday.

The slowdown in global coronavirus infection rates, recession-level pricing across markets, $2 trillion in fresh US fiscal stimulus, and a reversal in asset allocation have set the stage for price stabilization and a rebound, the bank added. The current conditions establish a buying opportunity for investors aiming to ride an uptrend through the second quarter.

Volatility will remain higher than average in the near term, but "enough has changed fundamentally and technically to justify adding risk selectively," the team led by John Normand wrote in a note to clients.

Stocks slipped into bearish territory in just 20 days as the coronavirus pandemic roiled markets through February and March. The Treasury yield curve sank below 1% as new asset purchases from the Federal Reserve and risk aversion drove massive inflows to the traditional haven. Major banks expect that the US is either in a recession or will enter one by the second half of the year.

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Despite heightened risks, investors should begin reentering oversold markets to best prepare for price recoveries, JPMorgan said, as past recessions show valuations bottoming before the downturn ends. Markets where central banks are buying assets directly, such as Treasuries or corporate credit, are particularly appealing, the firm added.

The biggest risk looming over JPMorgan's call is the spread of the coronavirus throughout Europe and the US. Countries were swift to bolster market liquidity and issue record amounts of fiscal relief, but a prolonged shutdown in major economies could leave prices near their trough for months, the bank said.

"The missing criteria is a convincing deceleration in COVID daily infection rates, which have slowed to roughly 25% in the US and 17% in Europe," the strategists wrote. "But rates remain too high to say with confidence that social distancing and lockdown can be fully lifted in May such that activity can begin normalizing in early summer."

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Investors should also remain wary of oil investments and emerging-markets currencies until risks fade, the team added. The oil-market struggle between Russia and Saudi Arabia pushed the commodity to 17-year lows on Monday, and the bank sees prices potentially halving before a recovery begins.

Developing countries dealing with debt pressures will also see a slower rebound after an "uninspiring" jump alongside last week's broad rally, JPMorgan said.

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