Investors should tamp down on risk in their portfolios as the economic impact from the coronavirus unfolds, according to JPMorgan Chase & Co.

Markets could be left vulnerable to coronavirus troubles in China, strategists including Nikolaos Panigirtzoglou, Marko Kolanovic and John Normand wrote in a note late Wednesday. They recommended reining in portfolio risk by trimming their overweight call on equities to 5% relative to a benchmark allocation from 7%, and cutting the underweight on corporate bonds to minus 5% from minus 7%.

The moves come as JPMorgan sees a significant chance of an unexpected re-acceleration of new coronavirus cases as factories reopen in China and more people come into contact with each other. If the factories fail to reopen, the economic impact could prove much more severe, they said.

“Any re-acceleration in coronavirus cases as a result of factory re-openings or any delay in re-openings beyond next week would both be negative for markets,” the report said. “Despite this week’s equity market rebound, we are reluctant to chase short-term momentum and revert to the high equity exposures we had recommended at the end of last year. Instead, we tactically trim the risk of our portfolio further.”

Institutional investors such as Commodity Trading Advisors and other momentum traders likely still have elevated positions in U.S. equity futures, implying substantial room to propagate further negative news if Chinese factory closures are more protracted than currently expected, JPMorgan said. Global stocks have gained for four straight days after a dip last week.

“Economic spillovers from China to the rest of the world in the event of more adverse scenarios are likely to be significant,” the strategists said. “Global PMIs will inevitably take a hit in the coming releases, clouding the macro picture for at least the next one to two months. This could remove from the macro picture the positive impulse from the global PMI rebound that propelled equity and risky markets since last October.”

In addition to the changes in equity and corporate-bond allocations, JPMorgan exited its underweight in gold within commodities, as it sees retail and central-bank flows providing sustained support.

This article was provided by Bloomberg News.