3 reasons why investors should buy the stock market’s dip after a Reddit-fueled short-squeeze rattled hedge funds, according to JPMorgan’s quant guru

3 reasons why investors should buy the stock market’s dip after a Reddit-fueled short-squeeze rattled hedge funds, according to JPMorgan’s quant guru

Investors should "buy the dip" in stocks following last week's market decline of 3%, according to JPMorgan's quant guru Marko Kolanovic.

In a note on Friday, Kolanovic said the volatility sparked by a Reddit-fueled short-squeeze in certain stocks that rattled hedge funds doesn't change his outlook that stocks should continue their trend higher.

The damage to hedge funds was real, given Melvin Capital's 53% drawdown for the first month of the year. The hedge fund was short GameStop amid a short-squeeze rally that sent shares higher by more than 2,000% in a month.

The epic surge in GameStop and AMC Entertainment led to hedge funds dumping their stock exposure at the fastest rate since 2009, according to a note from Goldman Sachs, which likely contributed to last week's decline in stocks.

But any market-induced volatility driven by the repositioning of the long/short investment community "is a buying opportunity," Kolanovic said.

Here are the 3 main reasons why investors should take advantage of the sell-off, according to JPMorgan.

Read more: Buy these 26 heavily shorted stocks as retail traders trigger wild rallies in Wall Street's least-liked names, Wells Fargo says

1. "Equity positioning is low in a long-term historical context, and we expect it to increase."

Expectations that the stock market will crash remain high, which