News/Commentary

S&P 500 could fall by roughly 20% before year’s end, warns JPMorgan market analyst

May 23, 2024 | | Print Article

A top JPMorgan market analyst has warned that the S&P will likely fall by roughly 20 percent before the end of the year.

JPMorgan’s Marko Kolanovic stressed this in a note he published Monday.

In the note, Kolanovic urged investors not to view the market as bullish despite the Dow Jones seemingly performing so well. Why not? Because one, interest rates are likely to remain high for the time being, and two, because also lower-level consumers have been displaying signs of weakness.

“With very high equity valuations, we do not see equities as attractive investments at the moment and we don’t see a reason to change our stance,” he wrote, according to Insider.

That being said, Kolanovic is the last remaining major bear in the market, as other forecasters have all turned bullish, including Morgan Stanley’s Mike Wilson.

“In the case of Morgan Stanley CIO Mike Wilson, it was ongoing strength in corporate earnings and the likelihood that earnings growth will accelerate in 2025 due to operating leverage that sparked his view change from bearish to bullish,” Insider notes.

ADVERTISEMENT

Kolanovic meanwhile argued that third- and fourth-quarter EPS (earnings per share) growth will need to move up by 16 percent compared to the first quarter of 2024 to meet expectations.

“That is unlikely, especially if the recent spell of softer activity data-flow continues,” he wrote.

He also reportedly warned that incoming new artificial intelligence technology isn’t apt to save the market.

“We don’t think that narrow themes like AI chips can compensate for all of those traditional market challenges that historically worked against the cycle,” he wrote.

Not everybody agrees with him about AI:

ADVERTISEMENT

Kolanovic wasn’t always bearish.

“The closely-followed Wall Street strategist was bullish on stocks for much of the 2022 bear decline, only to flip bearish right around the bottom made in mid-October 2022,” Insider notes. “From there, Kolanovic has remained consistently bearish on stocks throughout 2023 and 2024, when a rally of more than 40% materialized for the S&P 500.”

That said, this is the second time in months that he’s warned about the S&P’s potentially fatal upcoming drop.

Last October, he issued the same warning, claiming that a 20 percent sell-off to the S&P was incoming.

ADVERTISEMENT

“I’m not sure how we’re going to avoid it [recession] if we stay at this level of interest rates,” he told CNBC at the time.

“[We’re] not necessarily calling for an immediate sharp pullback. Could there be another five, six, seven percent upside in equities? Of course… But there’s a downside. It could be 20% downside,” he added.

He also warned that the stop stocks — including Apple, Amazon, Meta, Alphabet, Nvidia, Tesla, and Microsoft — were the most vulnerable and likely to suffer steep losses.

“If there’s a recession, I think the magnificent [seven]… will catch down where the rest is,” he said.

Interestingly,  his negative perspective on the economy has earned him massive skepticism, presumably from Biden supporters.

ADVERTISEMENT

Case in point:

As of the morning of May 23rd, the S&P was still performing exceptionally well and had just recently hit a record new high.

“Stocks closed with slight gains on Tuesday, sending the S&P 500, Nasdaq and S&P/TSX Composite Index to record levels, as investors assessed the latest comments from Federal Reserve officials for clues on the timing of a rate cut while quarterly earnings from Nvidia drew closer,” the Globe and Mail reported.

Vivek Saxena
Latest posts by Vivek Saxena (see all)

Comment

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the ∨ icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.

Latest Articles