Marko Kolanovic from JPMorgan is getting ready for a 20% market downturn and issues a recession warning.

Marko Kolanovic, a key figure at JPMorgan, is getting ready for a substantial 20% drop in the S&P 500.

According to this highly regarded member of the Institutional Investor hall of fame, the current high interest rates are pushing stocks towards a critical point. He recommends choosing cash with a 5.5% return in money market and short-term Treasurys as a vital protective strategy right now.

“I’m not sure how we’re going to avoid it [recession] if we stay at this level of interest rates,” stated the chief market strategist and global research co-head of the company in an interview on CNBC's "Fast Money" on Thursday.

Kolanovic doesn't see the current weakness as a definitive indicator of an impending significant downturn. He suggests that a short-term rebound is still possible, as it heavily depends on economic reports in the coming months.

"We're not necessarily predicting an immediate and sharp market decline," he explained. "Could equities see another five, six, or even seven percent increase? Certainly... But there's also a downside risk, which could amount to a 20% drop." He cautioned that the "Magnificent Seven" stocks, comprising Apple, Amazon, Meta, Alphabet, Nvidia, Tesla, and Microsoft, are particularly susceptible to substantial losses due to their remarkable gains amid high interest rates. This group has surged by 83% so far this year, contributing significantly to the S&P 500's overall gains.

"If a recession were to occur, I believe the 'magnificent seven' would likely decline along with the rest of the market," Kolanovic added, pointing out that sectors like consumer staples and utilities, which have faced challenges, could also be impacted.