‘Equities Continue To Price In Little Downside Risk’

JPMorgan Chase & Co. continues to hold one of the most pessimistic views on Wall Street regarding the U.S. stock market, expecting a decline in the coming months despite the S&P 500 reaching new all-time highs in June.

In a note released on Monday, JPMorgan’s co-head and chief market strategist of global research, Marko Kolanovic, His bearish view of equities was reiterated, and he advised investors to maintain a underweight position in stocks.

Kolanovic’s Bearish Outlook

“We still see a 50% probability that the macro picture will deviate from the soft-landing thesis, either because of a near term break in the U.S. Economy or because persistent inflation causes the Fed and other central banks to keep interest rates high for an extended time period or raise them further. This raises fears of a hard landing in 2025/2026.”

Kolanovic added: “Equities are still pricing in very little downside risk.”

JPMorgan re-evaluated its projections and predicted that the Federal Reserve is likely to remain on hold for this week.

“The committee is likely to be evenly divided between one and a two-cuts this year. We believe that a chair with a dovish bent will tip the balance in favor of two.” This week, our U.S. team changed its opinion to expect only one cut this year in November.

Kolanovic highlighted the fact that equities are ignoring a number of risks, such as political and geopolitical issues, narrow market concentrations, the surge in crypto and meme trading, which may indicate froth. He also noted that inflation/rates remain elevated and that various macro signals indicate elevated risks of a recession or economic slowdown.

Analyst: “Despite these numerous risks, equity markets continue to trade at record highs and investor sentiment is elevated.”

Unchanged S&P 500 Forecasts

Notably, JPMorgan’s S&P 500 forecasts for 2024 have not changed since the world’s largest investment bank issued its market outlook in late 2023.

Analysts at JPMorgan forecast the S&P 500 — as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) — ending the year at 4,200 points, implying a 22% drop from current levels.

Historically, a similar or larger drop in the S&P 500 index’s 6-month performance last occurred in the second half of 2008, following the Lehman Brothers crash, when the major U.S. equity index registered a 29.4% drop.

In the 157 semesters since 1946, only five times has the S&P 500 recorded a drop larger than 20%.

Other episodes with more than 20% drop in a timeframe of a half year during the post-War period are:

Story continues

• H1 1962: -23.5%

• H1 1970: -21%

• H2 1974: -20.3%

• H1 2022: -20.6%

Read Now Economist Warns ‘Crash Of A Lifetime’ Is Coming, Predicts S&P 500 To Plummet ‘86% From The Top’

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This article JPMorgan’s Top Strategist Sticks To Bearish S&P 500 Forecast, Warns Of 2008-Like Crash: ‘Equities Continue To Price In Little Downside Risk’ Original appeared on Benzinga.com

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