14-day Premium Trial Subscription Try For FreeTry Free
News Digest / Latest Stock Market News / JPMorgan's Marko Kolanovic Stands Alone in Predicting 20% Market Drop

JPMorgan's Marko Kolanovic Stands Alone in Predicting 20% Market Drop

Lukas Schmidt
04:35am, Wednesday, May 22, 2024
Hollis Johnson/Insider

JPMorgan's Marko Kolanovic Stands Firm on Bearish Market Outlook

Amidst a backdrop of record stock market highs, JPMorgan's Marko Kolanovic is maintaining his bearish stance, predicting a significant 20% decline in the S&P 500. Despite ongoing market optimism and the departure of other bearish voices, Kolanovic continues to foresee a challenging road ahead for equities.

Kolanovic’s Market Outlook

In his Monday note, Kolanovic reiterated his view that the S&P 500 could fall to 4,200, levels not seen since October. His forecast comes at a time when US stocks have been reaching record highs, with the S&P 500 recently trading above 5,300, marking a year-to-date gain of over 11%.

Kolanovic cited several reasons for his continued bearish outlook:

  • High Equity Valuations: Kolanovic believes current equity valuations are excessively high, making them unattractive investments at the moment.
  • Restrictive Interest Rates: With interest rates expected to remain in restrictive territory for the foreseeable future, Kolanovic sees this as a headwind for market growth.
  • Consumer Weakness and Geopolitical Uncertainty: He points to signs of weakness among lower-income consumers and high levels of geopolitical uncertainty as additional factors that could hinder market performance.

Contrasting Views on the Market

Kolanovic's steadfast bearish stance contrasts sharply with the recent shift in perspective by Morgan Stanley CIO Mike Wilson. Wilson abandoned his bearish outlook, citing ongoing strength in corporate earnings and the potential for accelerated earnings growth due to operating leverage in 2025. However, Kolanovic remains skeptical, arguing that the required earnings growth for the S&P 500 in the latter half of 2024 is unlikely, especially given recent weaker activity data.

Impact of AI and Market Dynamics

Kolanovic also expressed doubts about the ability of narrow market themes, such as AI chips, to offset traditional market challenges. "We don't think that narrow themes like AI chips can compensate for all of those traditional market challenges that historically worked against the cycle," Kolanovic noted.

A Tough Stretch for Kolanovic

Kolanovic’s bearish stance has been a difficult position to maintain, particularly as the market has rallied over the past two years. After being bullish during much of the 2022 bear decline, Kolanovic turned bearish around mid-October 2022. Since then, the S&P 500 has rallied over 40%, making his bearish forecast a challenging sell to investors.

Conclusion

As the last major bearish voice on Wall Street, Marko Kolanovic’s predictions are closely watched. His steadfast belief in an impending market correction underscores the ongoing debate about the future direction of the stock market. Whether his forecast of a 20% sell-off will materialize remains to be seen, but for now, Kolanovic stands firm in his cautionary stance amidst a sea of market optimism.

For more detailed analysis and real-time updates, visit StockInvest.us.

About The Author

Lukas Schmidt