Analysts at America’s biggest bank are sending a fresh warning to investors as the new year arrives.
In a new note to clients, JPMorgan chief market strategist Marko Kolanovic predicts declining growth and a likely recession will stifle US equities, reports Yahoo! Finance.
Kolanovic believes US markets are stuck in a catch-22 situation, and says the Federal Reserve may not lower interest rates until investors feel more pain.
“This is a catch-22 situation… This would imply that we would need to first see some market declines and volatility during 2024 before easing of monetary conditions and a more sustainable rally.”
JPMorgan analysts believe stocks may be poised to significantly underperform cash, says Yahoo Finance anchor Seana Smith.
“We know Kolanovic has tended to be a little bit bearish in terms of his expectations, limited upside that he’s seeing for equities next year…
In his expected environment of declining growth or a recession, he’s saying that this group could actually underperform cash by around 20%.
So clearly, he sees a lot more downside risk ahead for the markets.”
Smith says all eyes will once again be on the Fed, with investors potentially overoptimistic on if and when rate cuts may happen.
“A lot of this, a lot of these projections hinging around what the Fed rate cut timeline looks like exactly when we could potentially see a rate cut. The market very optimistic, maybe a little bit too aggressive in pricing in the fact that they see one as early as almost the first quarter of March of next year.
So when you take that into account and compare that to some of the more reserved expectations, there certainly is a wide variety of when that timeline is going to be. And also not only that, but once the Fed does start cutting, how quickly then they will continue to cut is also obviously up for debate.”
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