JPMorgan warns S&P 500 could tumble 20% by the end of the year

of US Stock Market The stock hit a record high last week, but analysts at JPMorgan say problems could still arise.

Marko Kolanovic, J.P. Morgan’s chief market strategist, has one of the most pessimistic forecasts on Wall Street. He and his team expect the S&P 500 to end the year at 4,200, the lowest year-end target of any major Wall Street bank. From current levels, that would imply a drop of more than 21%.

“Given the very high valuation of the stock, we do not believe it is an attractive investment at this time and see no reason to change our stance,” Kolanovic said in an analyst note this week.

Inflation rate rose 3.4% in April as prices continued to rise

January 27, 2023, Wall Street in New York City. (John Taggart/via Bloomberg/Getty Images)

Over the past week, stock prices have hit new record highs, with the Dow Jones Industrial Average topping 40,000 for the first time in history and the S&P 500 surpassing 5,300.

The index was little changed on Wednesday as investors awaited Nvidia’s earnings and meeting minutes. federal reserve This could reveal the timing of a rate cut.

Government hiring surge supports US job market

ticker safety last change change %
Me: DJI Dow Jones Average 39828.55 -44.44 -0.11%
I: Comp Nasdaq Composite Index 16837.025823 +4.40 +0.03%
SP500 S&P500 5319.98 -1.43 -0.03%

However, Kolanovic said interest rates could remain in restrictive territory for an extended period amid signs of stubborn inflation, evidence of weakness among low-income consumers, and rising geopolitical uncertainty. high, suggesting that this rise is unlikely to continue.

He cautioned that the boost from artificial intelligence is unlikely to offset other risks.

“We don’t believe that a narrow topic like AI chips can compensate for all the challenges of traditional markets, which have historically gone against cycles,” Kolanovic said.

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The gloomy outlook comes after a volatile year for the stock market.

All three indexes fell in mid-2023. federal reserve Interest rates will rise higher than previously expected, keeping them at peak levels for an extended period of time. But the S&P 500 Index has recovered more than 29% since bottoming out in late October.

Since the beginning of the year, the benchmark index has gained about 11.5%, and the Dow Jones Industrial Average has gained 5.5%, or about 2,098 points. Meanwhile, the Nasdaq Composite Index, which has a high proportion of tech stocks, has risen about 12% since the beginning of the year.