EVs and clean tech are bubbles that will deflate as economic recovery prompts rethinking of 'aspirational' sectors, says JPMorgan

• Bubbles in EV and clean-tech technology portions of the market began forming when the COVID-19 pandemic was growing in early 2020, says JPMorgan
• Investors are reassessing a "reset" agenda as economic recovery takes hold and bidding up oil and travel stocks.
• Tesla shares continued to selloff during Tuesday's session.

Bubbles in electric-vehicle and clean-technology stocks will deflate as investors look for exposure to a recovery in the world's largest economy, with oil and hospitality stocks emerging among such plays, said JPMorgan on Tuesday.

The bubbles trace back to February and early March 2020 when the coronavirus crisis began tightening its grip on US markets. Rallies were tied to the outlook for certain technologies, ideologies and policies and "only to a smaller extent to retail paycheck and popularity and momentum chasing," said Marko Kolanovic, head of macro quantitative and derivatives strategy at JPMorgan, during a Tuesday conference call held by the investment bank.

"Really they took off with COVID. There was this premise that we're going to close and reinvent and redesign the world and reimagine," he said.

He noted that the bubbles were not directly related to classical economic cycles and rather driven "by a reset agenda."

But with economic activity accelerating, "what you're seeing is oil moving up, copper moving up, retail names," and gains in shares of cruise lines and airlines, said Kolanovic. He pointed out that the energy sector is still down by 50% over the year.

"As the real economy is recovering some of these, call it, aspirational market segments are probably going to deflate," he said.

Oil prices and hospitality stocks were hit hard as the pandemic forced businesses worldwide to temporarily close, and in some cases multiple times, to curb the spread of the virus.

Retail investors "may get disillusioned a little bit with some of these names" in the bubbles. "You obviously had a lot of short-squeezing along the way last year. [Treasury Secretary] Janet Yellen had some comments about crypto yesterday so I think you may see some 'pouring the cold water' on the whole innovation angle," rather than a "pop that takes out everything," said Kolanovic.

JPMorgan during the conference call did not specify any particular stocks at risk of a correction.

But broader EV-sector weakness was seen in Tuesday's session, with Tesla, Nio and Nikola all down. Tesla in particular has seen an eye-popping rally. Shares climbed by more than 450% since early March through last Friday. The stock on Monday was hammered down 8.6% and continued to sell off on Tuesday.

Tesla's slide also comes alongside a drop in bitcoin this week following a massive February rally, during which the car maker announced it had made a $1.5 billion investment in the cryptocurrency. Yellen on Monday told CNBC that bitcoin is "an extremely inefficient way of conducting transactions, and the amount of energy that's consumed in processing those transactions is staggering."