The stock market has experienced a robust rally in recent weeks, propelling the S&P 500 index to its highest level since early August.
The surge is attributed to easing macroeconomic conditions, with growing investor confidence that the Federal Reserve (Fed) has concluded its rate-hiking campaign. A fresh wave of optimism has swept through the markets, notably led by the ‘Magnificent Seven,’ the seven largest tech companies, accounting for over 80% of S&P 500 gains in 2023 due to the ongoing artificial intelligence (AI) craze.
On November 29, JPMorgan’s chief global equity strategist weighed in on these trends, offering a surprising prediction for the S&P 500’s price at the close of 2024.
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The prediction
The latest rally in US equities has led to a number of Wall Street strategists offering bullish market predictions, with some of them even calling for all-time highs in the year ahead.
However, JPMorgan’s experts were not a part of this group, with the banking giant unveiling the most bearish forecast so far on the Street.
Notably, the S&P 500 is expected to plummet to 4,200 by the end of 2024, around 8% from its current level, said Dubravko Lakos-Bujas, JPMorgan’s chief global equity strategist.
Why does JPMorgan expect the S&P 500 to decline?
His gloomy prediction was based on discouraging economic indicators, including decelerating global growth, shrinking household savings, and persisting geopolitical risks. These headwinds, along with national elections including those in the US could exacerbate policy volatility, Lakos-Bujas stated.
“Absent rapid Fed easing, we expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed.”
The analyst’s bearish prognostication reaffirmed JPMorgan’s outlook heading into this year that has fallen short, with US stocks on track to register a double-digit annual gain. Currently, the S&P 500 is up 19% year-to-date, boosted by economic resilience, cooling inflation, and growing convictions that the Fed will impose no more rate hikes going forward.
In fact, traders expect the US central bank to begin cutting rates sometime next year, which, if happens, could be a fresh catalyst for the stock market.
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