In a significant departure from the prevailing bullish sentiment on Wall Street, last week saw JPMorgan’s chief global equity strategist offering a notably bearish outlook for the US stock market.
Contrary to the optimism of many, the expert predicted a significant downturn, anticipating the S&P 500 to plummet to 4,200 by the close of 2024. Citing economic indicators such as slowing global growth, diminishing household savings, and ongoing geopolitical risks, the strategist raised eyebrows with a forecast that challenges the prevailing bullish narrative.
This week, another JPMorgan specialist echoed these sentiments, delivering an even gloomier forecast for the S&P 500, foreseeing a sharp reversal towards bear market lows.
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JPMorgan’s top chartist predicts 23% pullback for S&P 500
Appearing on CNBC’s Squawk Box, JPMorgan’s Head of technical strategy Jason Hunter said the S&P 500 is facing a substantial reversal toward its bear market lows in 2024 to as low as 3,500.
That target indicates a pullback of more than 23% for the broader market index and represents a level not seen since late 2020.
“Stocks should pull back, [and] in my base case on the technical side, the S&P 500 is gonna drop to 3,500,” the bank’s top chartist told CNBC.
Hunter’s reasoning
Catalysts driving his bearish prediction include looming recession risks that could materialize despite a possible “soft landing” for the US economy. As a result, stock prices could come under pressure, potentially pushing the S&P 500 to multi-year lows.
“When you look at the timing since curve inversion, and go back into the 1960s and take yield curves that go back that far, as we move into next year, as that window continues to progress, you tend to find your way into a bear market that’s eventually associated with a recession way more often than not.”
– Hunter said.
Contrary to some expectations, the odds are pointing toward a “hard landing,” Hunter said, referring to an economic term used to describe a rapid and severe downturn characterized by a significant contraction in economic activity.
Additionally, markets are pricing in expectations that the Federal Reserve will begin cutting rates in 2024, and such a scenario signals a weaker stock market, Hunter explained.
If his prediction comes to fruition, it would erase all of the S&P 500’s 2023 gains, the bulk of which have been fueled by the ongoing tech revolution led by artificial intelligence (AI).
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