JP Morgan forecaster issues grim warning about the state of the stock market this year – and it could be cataclysmic
A JP Morgan analyst has warned that the stock market could become volatile despite hitting record highs this year.
Marko Kolanovic, the firm’s chief market strategist, published a note on Monday predicting that the S&P 500 could fall 20 percent to 4,200 points by the end of the year.
Kolanovic urged investors not to turn bullish even as the Dow Jones Industrial Average topped 40,000 for the first time last week, exciting most Americans who have at least some of their retirement funds invested in the Dow Jones, the S&P 500 and the Nasdaq.
His reasoning is that interest rates are likely to remain in restrictive territory for longer, coupled with lower-income consumers showing signs of weakness and a high degree of geopolitical uncertainty. Business insider.
“With very high equity valuations, we do not currently view equities as attractive investments and see no reason to change our position,” Kolanovic said.
But he is the exception among big bank analysts after Morgan Stanley’s Mike WIlson – the only other notable bear left on Wall Street – turned bullish this weekend.
JP Morgan market strategist Marko Kolanovic urged investors not to turn bullish despite the Dow Jones Industrial Average hitting 40,000 for the first time last week
The analyst said earnings per share growth in the third and fourth quarters will need to accelerate 16 percent from the first quarter to meet S&P 500 2024 earnings to meet investor expectations.
“That is unlikely, especially if the recent period of softer activity data flow continues,” Kolanovic said.
He also warned against claiming that the development of technology such as artificial intelligence could help improve the stock market.
“We don’t think narrow themes like AI chips can offset all those traditional market challenges that have historically worked against the cycle,” Kolanovic says.
U.S. stock indexes circled near records on Wednesday, continuing a days-long streak of quiet trading.
The S&P 500 was essentially unchanged in afternoon trading, a day after setting its latest all-time high.
The Dow Jones Industrial Average fell 30 points, or 0.1 percent, as of 12:36 p.m. ET. The Nasdaq composite was largely unchanged, hovering near its last record high.
The Dow Jones Industrial Average crossed the 40,000 point threshold for the first time ever on Thursday.
Kolanovic published a note on Monday predicting that the S&P 500 could fall 20 percent to 4,200 points by the end of the year.
It provided a welcome boost for economists after two years of uncertainty fueled by red-hot inflation and rising interest rates.
Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, said: “Breaking the 40,000 mark is a big psychological boost for the bulls, as round numbers hold special meaning in people’s hearts and minds.”
Most Americans have at least a portion of their 401(K) and individual retirement accounts invested in the Dow Jones, the S&P 500 and the Nasdaq.
U.S. stock markets have risen since the start of the year as investors bet on an AI-driven rally, robust profits and hopes that the Federal Reserve would ease the tightening cycle.