'A once in a decade opportunity': JPMorgan breaks down how to take advantage of the largest bubble in modern history

"Currently, there is a record divergence between value/cyclical stocks on one side, and low volatility/defensive stocks on the other side," Marko Kolanovic, JPMorgan's global head of macro quantitative and derivatives research, wrote in a recent client note. "The level of divergence is much more significant even when compared to the dot com bubble valuations of late '90s."

Kolanovic went on to declare the ongoing phenomenon a "once in a decade opportunity."

The chart below depicts the growing divergence between value and low-volatility assets - a relationship that hasn't historically experienced large fluctuations.

JPM

"While there is a secular trend of value becoming cheaper and low volatility stocks becoming more expensive due to secular decline in yields, the nearly vertical move the last few months is not sustainable," he said.

This sets the stage for what could be a large, fast-moving convergence. As for a potential catalyst, Kolanovic thinks stabilizing economic data, trade war progress, and Fed easing could do the trick.

JPMorgan's quant guru even took it a step further, identifying the areas of the market that could benefit from such a shift. In his mind, a hungry investor looking for sharp gains could do a lot worse than monitor these areas for a potential upside explosion.

"This rotation would push significantly higher all the laggards such as small caps, oil and gas, materials, and more broadly stocks with low P/E and P/B ratios," he said.