Stock market ‘correction’ isn’t over yet, JPMorgan warns

The recent economic downturn is us stock market JPMorgan strategists say this is likely the beginning of another decline.

Marko Kolanovic, chief market strategist at JPMorgan, said in a note on Monday that although stocks rebounded early in the week, the market still faces a number of macroeconomic risks. These headwinds include diminished expectations. federal reserve Interest rate cuts are scheduled for this year, there are signs that inflation will continue, and stock valuations are above average.

“Price trends may be driven by earnings and may stabilize in the short term,” Kolanovic said. “But beyond this, we think the stock market decline will continue further. Continued complacency in stock valuations, persistently high inflation, further Fed rate hikes, and an implied acceleration this year go too far. “We remain concerned about the likely earnings outlook.” “

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

Stocks rose on Monday as investors awaited a flurry of earnings results from big tech companies and the release of economic indicators such as first-quarter gross domestic product and the Fed’s favorite inflation measure later in the week. .

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The Nasdaq Composite Index led the way with a 1.1% gain, while the Dow Jones Industrial Average rose 0.7% and the S&P 500 Index rose 0.9%. The stock market looked poised to continue those gains Tuesday morning.

ticker safety last change change %
Me: DJI Dow Jones Average 38495.78 +255.80 +0.67%
I:Comp Nasdaq Composite Index 15690.043698 +238.74 +1.55%
SP500 S&P500 5070.18 +59.58 +1.19%

However, Kolanovic compared the current market outlook with the outlook for summer 2023 and suggested that the rally is unlikely to continue.

“While the current market story and pattern increasingly resembles that of last summer, when upside to inflation expectations and hawkish Fed revisions prompted a correction in risk assets, investor positioning remains It appears to be increasing now.”

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 many of those losses have been recouped, with the S&P 500 index up about 22% since bottoming in late October.

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Since the beginning of the year, the benchmark index has gained about 6.6%, while the Dow Jones Industrial Average has gained just 1.78%. On the other hand, the Nasdaq Composite Index, which has a high proportion of high-tech stocks, rose about 5.9%.

Kolanovich’s forecast is one of the most pessimistic on Wall Street. They believe S&P’s year-end target will be $4,200, the lowest among Wall Street banks. Based on current levels, this represents a decline of nearly 17%.