Just as Wall Street strategists are predicting that the US stock market will reach new historical highs next year, JPMorgan Chase has taken a different stance and released its most pessimistic forecast to date.
On Wednesday, JPMorgan’s Chief Global Equity Strategist Dubravko Lakos-Bujas published a report stating that due to global economic slowdown, shrinking household savings, and persistent geopolitical risks, including the potential policy volatility resulting from national elections including in the United States, the S&P 500 index is expected to fall to around 4,200 points by the end of 2024, representing a decline of approximately 8% from current levels.
JPMorgan issues Wall Street’s most pessimistic expectations
JPMorgan’s outlook stands in contrast with many on Wall Street. After numerous analysts who were bearish at the end of last year were proven wrong by strong performance of US stocks this year, most analysts on Wall Street have shifted their positions towards bullishness and issued expectations for new highs in the S&P 500 index next year.
Bank of America and Royal Bank of Canada both expect the S&P 500 index to reach new highs above 5,000 points. Deutsche Bank even called for a target of 5,100 points. Even Morgan Stanley analyst Mike Wilson who has consistently held bearish views on US stocks has become more optimistic and predicts that the S&P 500 index will close at around 4,500 points by the end of next year which is roughly flat compared to current levels.
Among these bullish voices,JPMorgan’s forecast is among one of lowest among major investment banks on Wall Street.
“If not for rapid easing policies from Federal Reserve (Fed), we anticipate more challenging macro backdrop for US equities next year. With investor positioning and sentiment largely reversed while consumer trends soften,” wrote JPMorgan strategists in their report.
As of Wednesday’s close, the S&P 500 index stood at 4,550.80 points. Year-to-date, the index has already gained 18.52%. The main reasons behind this performance are strong economic data, declining inflation, and expectations that actions by Fed officials to raise interest rates will soon come to an end. Additionally, the rebound in corporate profits and the surge in technology stocks driven by artificial intelligence have boosted market sentiment throughout 2023.
JPMorgan sticking with bearish view despite being proven wrong last year?
In fact,JPMorgan had a similarly pessimistic outlook for US stocks in 2023 at the end of last year – but this year’s actual performance did not align with JPMorgan’s expectations: US stocks have continued to rise strongly and are on track for double-digit annual gains.
“In some ways our macro backdrop forecast for 2024 is similar to what we expected a year ago for 2023; just less gloomy,” wrote JPMorgan strategists in their report.
JPMorgan stated that considering the prospect of longer duration and higher interest rates from Federal Reserve (Fed), Wall Street’s current overall expectation for US equities seems overly optimistic.