Marko Kolanovic, the chief global market strategist for JPMorgan Chase, is not sugar coating the reality of the financial crisis our nation is experiencing right now, going on to predict that the S&P 500 is going to take a massive drop of almost 23 percent from 5,483, where it was on June 27, down to 4,200 by the end of the current year (2024). Looks like we’re in for a rather bumpy ride, folks.
I know, I know. Isn’t that what we’re already experiencing? Yes, it is. But, believe it or not, we’re going to get even more bumpy. Hills and valleys and all that. Only thing is, this is a really steep descent into a really lengthy valley.
More details are available from the International Business Times:
US real gross domestic product increased at an annual rate of 1.4% in Q1 2024, a marked decline from 3.4% growth in Q4 2023. Kolanovic and his team’s gloomy economic outlook comes as the S&P 500 looks on track to reach record highs. It surpassed the 5,500 mark in early trading on June 28, as cooling US inflation continues to drive bets on US Federal Reserve rate cuts later this year. The market rally on excitement around AI has translated to massive gains for tech investors.
Kolanovic is one of the few strategists who have retained their bearish outlooks all year despite peers at Goldman Sachs, Citigroup, and Bank of America upgrading their 2024 S&P 500 targets to keep up with the year-long market rally. The average 2024-end projection for the index stood at 5,317, implying a 3% fall.
“There is a clear disconnect in the huge run-up in US equity valuations and the business cycle,” the JPMorgan strategists wrote, adding that the S&P 500’s 15% year-to-date climb is not justified, considering faltering growth forecasts.
“There is a risk that an opposite of the hopeful expectation could play out in coming quarters where growth decelerates, inflation remains firm, and long-term rates don’t move sharply lower,” they stated.
Kolanovic was also bullish back in 2022 when the the S&P 500 took a steep tumble of 19 percent and was then bearish when the equity gauge leapt up 24 percent. The reason he’s skeptical of the market rally is due to the fact that economic metrics are lagging and consumers are in distress due to the poor conditions, high inflation, and sky-high price of gas, food, and housing.
“He highlighted that the US Fed could deliver fewer rate cuts than the market anticipates, further mounting pressure on the economy and stock valuations in the latter half of the year. Kolanovic suggested diversification by enhancing exposure to ‘anti-momentum’ defensive value plays such as utilities, health care, and dividend stocks,” the report said.
Bank of America analysts recently highlighted that the US housing affordability crisis would remain the same until at least 2026 amid record property prices and short supply as homeowners stay locked into pre-pandemic mortgage rates amid elevated inflation.
Latest data from the US Census Bureau revealed that new single-family rental sales in May fell by over 11% quarter-over-quarter to 619,000, while construction of new residential homes plummetted 5.5% to 1.27 million. Meanwhile, the median sales price of a new house sold in May also jumped to $417,400. These factors have analysts concerned about the housing market becoming a drag on the economy in the foreseeable future.
In other words, things suck now, but they’re going to suck more later. It never seems to end, does it? Kind of depressing, but thankfully, God is still in control. Otherwise, the suckiness would suck far more than the suck that’s coming at the end of the year.
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