NEW DELHI: JP Morgan has issued a mighty warning on the US stock market, predicting a significant decline in the S&P 500 index by the end of the year. The bank’s chief market strategist, Marko Kolanovic, predicts the index will fall to 4,200, which would be the lowest year-end target level among major Wall Street banks. This forecast assumes a decline of over 21% from the current level.
“At very high share valuations, we do not view the stock as an attractive investment at this time and see no reason to change our position,” Kolanovic wrote in an analyst note this week. According to a Fox News report, this bleak outlook is one of the most grave on Wall Street.
Despite recent record highs, including the Dow Jones Industrial Average crossing 40,000 for the first time and the S&P 500 above 5,300, Kolanovic suggests these gains are unlikely to be sustainable. He cites several factors behind this bearish forecast, including persistently high interest rates, signs of persistent inflation, evidence of financial stress among lower-income consumers and growing geopolitical uncertainty.
Kolanovic also noted that recent developments driven by artificial intelligence are unlikely to offset these conventional market challenges. “We don’t think narrow themes like AI chips can compensate for all the conventional market challenges that have worked against the cycle in the past,” he said.
This grim forecast follows a volatile year for the stock market. All three major indexes suffered significant declines in mid-2023 on concerns that the Federal Reserve will raise interest rates higher than expected and keep them at their highest levels for an extended period. But indexes have since made up for those losses and more, with the S&P 500 up more than 29% since its low in overdue October.
Year-to-date, the S&P 500 Index is up about 11.5%, the Dow Jones Industrial Average is up 5.5% and the Nasdaq Composite is up about 12%. Despite these gains, JPMorgan’s warning suggests investors should prepare for potential future turmoil.
“At very high share valuations, we do not view the stock as an attractive investment at this time and see no reason to change our position,” Kolanovic wrote in an analyst note this week. According to a Fox News report, this bleak outlook is one of the most grave on Wall Street.
Boost
Despite recent record highs, including the Dow Jones Industrial Average crossing 40,000 for the first time and the S&P 500 above 5,300, Kolanovic suggests these gains are unlikely to be sustainable. He cites several factors behind this bearish forecast, including persistently high interest rates, signs of persistent inflation, evidence of financial stress among lower-income consumers and growing geopolitical uncertainty.
Kolanovic also noted that recent developments driven by artificial intelligence are unlikely to offset these conventional market challenges. “We don’t think narrow themes like AI chips can compensate for all the conventional market challenges that have worked against the cycle in the past,” he said.
This grim forecast follows a volatile year for the stock market. All three major indexes suffered significant declines in mid-2023 on concerns that the Federal Reserve will raise interest rates higher than expected and keep them at their highest levels for an extended period. But indexes have since made up for those losses and more, with the S&P 500 up more than 29% since its low in overdue October.
Year-to-date, the S&P 500 Index is up about 11.5%, the Dow Jones Industrial Average is up 5.5% and the Nasdaq Composite is up about 12%. Despite these gains, JPMorgan’s warning suggests investors should prepare for potential future turmoil.
