The earnings season will kick off this month and may be the worst since the global financial crisis. Time to sell stocks? Not yet, according to JPMorgan Chase & Co.’s Marko Kolanovic.

While profit expectations have worsened during the coronavirus pandemic, pushing the S&P 500’s price-earnings ratio to a 20-year high, equities look cheap relative to bonds amid economic stimulus, the strategist wrote. That could encourage money managers such as pension funds to shift asset allocations from fixed income to stocks, according to him.

From long-short hedge funds to computer-driven traders, equity positioning has been stuck below where it is typically, JPMorgan data shows. Should their holdings reach the historic median, that would mean an addition of $400 billion in stock exposure that could “easily push the broad market to new highs,” Kolanovic wrote.

With the S&P 500 trading around 3,150 on Wednesday, the gauge was about 7% below its record high of 3,386.15 reached in February.

“Many investors did not participate in the equity rally. The argument against the rally is that given earnings forecasts impacted by Covid-19, equities are expensive relative to history,” Kolanovic said. “What this argument is missing is that large pools of money invest not just within equities but across asset classes.”

The bullish assessment comes as the S&P 500 struggles to break out of a monthlong trading range. After surging more than 40% from March’s trough to early June, the benchmark index has since been confined in a 250-point band as investors weigh prospects of additional fiscal stimulus against the risk of a second wave of virus infections and Democratic candidate Joe Biden potentially taking over the White House from President Donald Trump in November.

The uncertainty over the economic and political outlook has driven traders to the safety of technology megacaps and away from banks and energy stocks, which are considered more sensitive to any growth slowdown. The Nasdaq 100 has climbed 22% this year, compared with a loss of 2% for the S&P 500. Over the same stretch, energy and financial shares are down more than 25%.

“Managers are buying mega-cap tech and momentum stocks while shorting smaller cyclical and value stocks. This trade is in part driven by market expectations for the Covid-19 pandemic to worsen (or not get better) and lead to permanent shifts in the economy,” Kolanovic wrote. “We think the market is not properly pricing either of these events, a repricing of which could result in a rapid momentum selloff and value rally.”

This article was provided by Bloomberg News.