This is the first time in 10 years that you have a shock and labor market pressure: JP Morgan Head of Global Equity Strategy

Yahoo Finance's Brian Sozzi and Alexis Christoforous speak with Mislav Matejka, JP Morgan Head of Global Equity Strategy about the timeline of an economic recovery.

Video Transcript

ALEXIS CHRISTOFOROUS: Joining us now to discuss more on the European markets and global equities is Mislav Matejka, JPMorgan's Head of Global and European Equity Strategy. Mislav, thanks so much for being with us. You're joining us today on the phone.

I want to get your thoughts on something that broke just a short time ago. The chief of the International Monetary Fund warning that full global economic recovery is unlikely in 2021. So we're looking at a recovery here that could take 18 months to two years. What is your reaction to that timeline, Mislav?

MISLAV MATEJKA: Thank you very much for having me. I would say this is not surprising. If you look at all the recessions since the Second World War, it takes time for the economy to come back. You have the collateral damage.

And if you think about particularly about the earnings, the earnings to reach the past highs and to surpass them, they usually take three to five years. And what is worrying is that, yes, consensus is cutting the numbers for this year quite aggressively, which is right, but they still have the next year number higher than 2009 actual. That is what doesn't happen typically.

ALEXIS CHRISTOFOROUS: Just to follow up on that, what's your feeling on us being able to bounce back more quickly this time, though, versus past recessions because, unlike other recessions, this was sparked by a health crisis? There was nothing systemic that was wrong with our global financial system. So wouldn't you expect us to snap back a little faster than previous recessions?

MISLAV MATEJKA: I mean, just to put it in the context, we did publish yesterday we actually expect a very strong rally in the cyclicals and in value. We'll talk about that probably in more detail.

I will just say one thing that, yes, the policy response is so much more aggressive, but let's not forget that we had a cycle in the last 10 years which was quite strong. So we didn't start this shock depressed and low and depleted. You had car sales, housing starts, consumer all having enjoyed a 10-year cycle.

And the problem here is that for 10 years one didn't see a consumer labor market dislocation. So the market is used to buying in a dip. There is a European crisis in 2012. You buy the dip. There is a China devaluation scare in 2015. You buy the dip. There is a trade uncertainty in 2018 Q4. You buy the dip.

This is the first time in 10 years that you have a shock plus labor-market pressure. And that's why our view would be, yes, it's right that you had the rally on the back of the policy support, but what comes after this near-term technical rebound is a bit more of drift, and it's going to take time to recover fully.

BRIAN CHEUNG: Mislav, I'm starting to hear from some folks on the Street that election-season risk will start to be priced into stocks this summer. Do you agree, and what type of risk does get in-- get priced in, upside or downside?

MISLAV MATEJKA: This is another one. We were bullish on the equity markets the whole of last year. Our story was the S&P 500 makes a significant new all-time high before the elections are out of the way because there needs to be a ceasefire. There will be a compromise reached into the election for Trump to look more electable.

The problem now is that you have this risk rising again ahead of the elections that there could be uncertainty between the US and China picking up more aggressively over the next months, and that could, at some point as we going into the debates, be a bit of a constraint.

ALEXIS CHRISTOFOROUS: All right, Mislav Matejka, JPMorgan's head of global and European equity strategy, thanks so much for being with us this morning.

MISLAV MATEJKA: Thank you.