JPMorgan says S&P 500 will fall next year amid ‘difficult macro backdrop’

Not everyone expects stocks to rise in 2024.

A new forecast from JPMorgan’s (JPM) Global Equity Strategy team predicts that the S&P 500 (^GSPC) will end 2024 at 4,200, a roughly 8% decline from where the index sat on Wednesday.

“Absent rapid easing from the Fed, we expect a more challenging macro backdrop for equities next year as consumer trends soften at a time when investor positions and sentiment are mostly reversed,” JPMorgan equity strategists led by Dubravko Lakos-Bojas wrote in the team’s 2024 outlook. . Wednesday.

“Equities are now richly valued with volatility near historic lows, while geopolitical and political risks remain elevated.”

JPMorgan’s call is much lower than most other Wall Street strategists. Even Morgan Stanley’s Mike Wilson, who has been a famous bearish over the past several years, expects the S&P 500 to hit 4,500 at the end of 2024.

In Wilson’s 2024 forecast, he expects earnings to continue to rebound in 2024, with EPS up 7%. From the previous year. JPMorgan is not optimistic about earnings, which are usually the main driver of stock performance.

JPMorgan believes S&P 500 earnings will increase 2% to 3% from the previous year, resulting in earnings per share of $225 in 2024. The company notes that other higher earnings targets reflect an economy in the “early cycle” or “while cycle.” , referring to the growing narrative that the Fed’s rate hike campaign will end without a recession.

But Lakos-Bojas points out that household savings are declining, borrowing costs for both consumers and businesses are at their highest levels in several decades, and global demand is slowing amid declining inflation.

“For this reason, we assume another year of below-trend earnings growth with sequentially lower revenue growth, no margin expansion, and lower shareholder payouts,” the JPMorgan team wrote.

The story continues

While many on Wall Street believe earnings may have turned a corner, JPMorgan is standing by economists who have highlighted that rising credit costs will eventually slow the US economy in 2024. A new report from the Reserve Bank noted The Federal Reserve said on Wednesday that a slowdown may already be underway.

JPMorgan also points to recent comments from management teams during earnings calls that depict a deteriorating outlook for both consumers and the cost of credit. According to JP Morgan’s work, sentiment around the cost of capital has not been this low since the Great Financial Crisis.

“In the absence of significant support from monetary or fiscal policy, we see consensus growth assumptions at this stage [as] “More hopeful than realistic,” the JPMorgan team wrote.

Josh Schaeffer is a reporter for Yahoo Finance.

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