JPMorgan’s top strategist is telling investors to buy more gold and remain underweight stocks. Marko Kolanovic on Tuesday said he holds a negative outlook over the medium term, even as stocks come off their recent lows. All three major averages remain higher this month, shrugging off higher yields and the breakout of the Israel-Hamas conflict. The S & P 500 is up around 2%. “Our outlook is likely to remain cautious as long as interest rates remain deeply restrictive, valuations expensive, and the overhang of geopolitical risks persists,” Kolanovic wrote. In fact, the strategist expects the upward march in equities is ‘unsustainable’ in a higher-for-longer interest rate environment. Kolanovic advised traders to maintain a defensive allocation, saying he is underweight equities in his model portfolio. “Equity valuation faces increasing risk from higher for longer. Equities are up YTD mostly on multiple expansion while real rates and cost of capital are moving deeper into restrictive territory,” Kolanovic wrote. “History suggests this relationship is becoming increasingly unsustainable, posing risk to the equity multiple. The current level of real rate (~2%) implies S & P 500 multiple is overvalued by ~2.7x (or ~3.9x if post-Covid stimulus and TMT bubble episodes are excluded),” he added. XAU= 5D mountain XAU Kolanovic also added to his gold exposure, saying the commodity will act as a hedge to looming geopolitical risks and an expected fall in bond yields. On Friday, the safe haven metal notched its best day of the year, with gold futures settling higher by 3.11%. On Tuesday, it remains above the key $1,900 per ounce level . — CNBC’s Michael Bloom contributed to this report.