The stock market has already discounted a modest recession, and that means investors can bet on a rebound, according to a top strategist at JPMorgan. Fears of a recession have grown steadily since the start of the summer, with many economists expecting a second consecutive negative GDP reading later this week. However, JPMorgan’s Marko Kolanovic said in a note to clients on Monday that the stock market’s year-to-date declines and lower estimates from Wall Street analysts show that negative economic news is already coming at a price. “While the odds of a recession are rising, a mild recession already appears to be priced in based on the prior year’s underperformance of cyclical versus defensive equity sectors, the depth of negative earnings revisions already matching the previous recessionary moves and the shift in rate markets to price at a previous high and low in federal funds,” Kolanovic wrote. . A potential positive for stocks is that bond traders are starting to bet that the Federal Reserve may have to cut rates next year. The Fed’s rate hikes, which began in March, are one of the reasons many Wall Street professionals are pointing to a tough market this year. “With the peak of Fed pricing likely behind us, the worst for risk markets and market volatility should also be behind us,” Kolanovic wrote. Defensive stocks have generally outperformed high-growth areas such as technology this year, but the Nasdaq Composite has gained about 7% in July. As investors become more comfortable with the path of a recession, growth stocks will find their place, Kolanovic said. “We have been arguing for tactically favoring growth over value, which can also be expressed through a better sample of the technology sector. Traditional defensives show the worst relative valuations against historical ones, with a relative P/E of Staples is currently trading at an all-time record, even considering the worst recessions of the last 20-30 years,” Kolanovic wrote. Kolanovic has remained bullish on stocks in 2022 despite a difficult first half that dragged the S&P 500 into a bear market. The strategist said last month that he expected the S&P 500 to finish the year flat. — CNBC’s Michael Bloom contributed to this report.