(Bloomberg) -- Investors are likely to favor gold and technology stocks as those bets are expected to provide a buffer against the possibility of a US recession this year, according to strategists at JPMorgan Chase & Co.

The trade defined as “long duration” is expressed by being overweight on gold, growth stocks such as technology companies and currencies (short USD), strategists including Nikolaos Panigirtzoglou and Mika Inkinen wrote in a note, adding the bet is far from crowded in rates due to the highly inverted yield curve.

“The US banking crisis has increased the demand for gold as a proxy for lower real rates as well as a hedge against a ‘catastrophic scenario,’” they wrote.

JPMorgan notes that the long duration theme seems to have become a consensus in recent months. Such a trade looks “relatively attractive” as it would have limited downside in a mild US recession scenario, but plenty of upside in a deeper recession.

Other key points from the report:

  • Indeed, the share of tech in global equities has risen sharply this year, approaching the 2021 highs, implying that the world as a whole has become more overweight tech In addition, by looking at the short interest across US equity sectors, tech has the lowest short interest pointing to an increase in the net exposure by long/short equity investors.
  • Institutional investors flocked into gold, but it appears retail investors boosted exposure to Bitcoin.
  • In credit, investors are going long investment-grade corporate bonds
    • “This is because high-grade corporate bonds have typically higher duration of around 7-8 years, around double that of high yield corporate bonds”
  • In currencies, investors express duration trade by going short US dollar, “given the strong negative correlation between US bonds and DXY performance”

--With assistance from Shikhar Balwani.

©2023 Bloomberg L.P.