JPMorgan warns S&P 500 could tumble 20% by the end of the year

JPMorgan warns S&P 500 could tumble 20% by the end of the year

THE American stock market hit a new record high over the past week, but trouble could still be on the horizon, according to JPMorgan analysts.

The forecasts from JPMorgan chief market strategist Marko Kolanovic are among the most pessimistic on Wall Street. He and his peers estimate the S&P 500 will end the year at 4,200, the lowest year-end target among Wall Street’s major banks. Compared to current levels, this implies a drop of more than 21%.

“With very high stock valuations, we do not view stocks as attractive investments at the moment, and we see no reason to change our position,” Kolanovic wrote in an analyst note this week.

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JPMorgan warns S&P 500 could tumble 20% by the end of the year

Wall Street in New York, January 27, 2023.

Stocks hit record highs over the past week, with the Dow Jones Industrial Average surpassing 40,000 for the first time, while the S&P 500 topped 5,300.

Indexes were little changed Wednesday as investors awaited Nvidia results and minutes of company meetings. Federal Reserve this could shed light on the timing of interest rate cuts.

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But Kolanovic suggested the gains are unlikely to last, with interest rates likely to remain in restrictive territory for longer due to signs of stubborn inflation, weakness among low-income consumers and growing geopolitical uncertainty.

The rise of artificial intelligence is unlikely to offset other risks, he warned.

“We don’t think narrow themes like AI chips can offset all of these traditional market challenges that have historically worked against the cycle,” Kolanovic said.

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These gloomy forecasts come after a volatile year for the stock market.

All three indexes fell in mid-2023 on fears that Federal Reserve would raise interest rates higher than expected – and keep them at peak levels for longer. But they have recouped those losses and more, with the S&P 500 up more than 29% since its low in late October.

Year to date, the benchmark index is up about 11.5%, while the Dow Jones Industrial Average has climbed 5.5%, or about 2,098 points. The technology-heavy Nasdaq Composite has increased by around 12% since the start of the year.

Original article source: JPMorgan warns that the S&P 500 could fall 20% by the end of the year

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