Investors are messing with the wrong central bank, JPMorgan's Marko Kolanovic said Wednesday. "There is an old adage, 'don't fight the Fed,' but this behavior is not just fighting but also taunting the Fed with crypto, meme stocks, and unprofitable companies responding best to Fed communications," Kolanovic, the bank's chief global market strategist, said in a note to clients. He pointed out that since the Fed's rate hike on Feb. 1 , the Nasdaq-100 has climbed around 3%. The Nasdaq-100 is largely made up of growth and tech stocks, many of which got crushed last year as the central bank embarked on its rate hiking cycle to temp down inflation. Meanwhile, the 2-year Treasury note yield has jumped about 60 basis points in that time. It traded at 4.62% on Wednesday after trading as low as 4.03% earlier this month. US2Y YTD mountain 2-year note yield in 2023 This type of market behavior could lead to a sell-off in short order, according to Kolanovic. The strategist said that such a move higher in bond rates should result in a 5%-10% drop in the Nasdaq, based on historical regression analysis. Instead, the index is higher. "This divergence cannot go much further, in our view, and may revert," he noted. "This relationship is not just theoretical but often enforced by pensions selling opportunistically and at month-end, or in the context of defined benefit plans' rebalances." Kolanovic has gained a large following in recent years. He correctly called the March 2020 bottom and the ensuing market rally. But he was too bullish heading into 2022 as markets rolled over. — CNBC's Michael Bloom contributed reporting.
