Meanwhile US stock market updates all time highs, among investment banks there are those who expect a change of gear. And painful too. It’s about Marko Kolanovic, Chief Strategist at JPMorgan, among the few who see black on the S&P 500’s outlook.
“At a very high valuation of the stock, we currently do not believe the stock is an attractive investment and see no reason to change our position.” Kolanovic reiterated in a note a few days ago, explaining that the benchmark could fall to 4,200 points this year, a level not seen since October, and implying a 30% correction from current values.
All this before yesterday’s slightly bullish session on Wall Street saw the S&P 500 (5,487.03 points) and the Nasdaq Composite (17,862.23 points) break records thanks to Big Tech. And specifically Nvidia has become during this time the company with the largest capitalization in the world.
What’s behind the bearish view?
While Kolanovic acknowledges that his bearish view on stocks has hurt the performance of his multi-asset portfolio over the past year, he remains steadfast in his belief that the outlook for the S&P 500 is far from rosy. This is for a number of reasons, starting with the fact that The FED’s monetary policy will remain tight for some time. Weak consumption by low-income earners and high levels of geopolitical uncertainty don’t help. Even artificial intelligence, the expert emphasizes, will not save the securities market.
“We don’t think issues like AI chips can offset all of the traditional market challenges that have historically faced bull markets.” explained Kolanovic, adding that “Our cautious stance is based on the view that there will be no share revaluation and therefore any upside will have to come from earnings growth, which we believe is not sufficient to bear the equity risk.”
What about? useful JP Morgan’s strategist believes that in order to meet market expectations. Third-quarter and fourth-quarter EPS growth should accelerate 16% from the first quarter. An event that the expert considers “unlikely”. Kolanovich expects that. In 2024, S&P 500 earnings will be $225, compared to reaching $221 in 2023. That’s well below Wall Street forecasts, which had expected $240 per share.
Which could have avoided the collapse
However, there is one situation that could avoid a sell-off if it happens, which is that “the technology sector is rapidly becoming a much bigger growth engine for the overall economy,” Kolanovic said.
“While we believe that technology will continue to be a key driver of economic growth for years to come, we do not believe that its impact on corporate results will be as profound, and therefore we remain cautious in expecting economic growth to weaken, stocks will undergo decline. correction and investors find a better entry point.” Kolanovich wrote:
What do other analysts think?
It must be said that Kolanovic’s bearish position in the stock market has not always been so lonely, but recently even the most pessimistic have changed their minds. Between these Julian Emanuel, strategist at Evercore ISI, which last Monday raised its price target to S&P 500 at 6,000 from previous target of 4,750.
Also Morgan Stanley CIO Mike Wilsonn, who had long been bearish on the stock market, turned bullish last month, raising his target price on the S&P 500 to 5,400 from 4,500 previously.
It’s worth noting, then, that in recent years, Kolanovic, whose forecasts are closely watched on Wall Street, has been bullish on the stock for most of the 2022 fall, then reversed to a mid-October 2022 low. at the time, Kolanovic was consistently bearish on the stock throughout 2023 and 2024, when the S&P 500 rallied more than 40%.