Not everyone expects stocks to rise in 2024.
A new outlook from JPMorgan’s (JPM) global equity strategy team expects the S&P 500 (^GSPC) to end 2024 at 4,200, down about 8% from the benchmark’s level on Wednesday.
“Without rapid Fed easing, we expect a more difficult macroeconomic environment for stocks next year with weakening consumer trends at a time when investor positioning and sentiment have largely reversed,” JPMorgan equity strategists led by Dubravko Lakos wrote -Bujas in the team’s published 2024 forecast on Wednesday.
“Stocks are now highly valued, volatility is near historic lows, while geopolitical and political risks remain high.”
JPMorgan’s call is significantly lower than that of most other Wall Street strategists. Even Morgan Stanley’s Mike Wilson, a prominent bear in recent years, expects the S&P 500 to hit 4,500 by the end of 2024.
In Wilson’s 2024 forecast, he predicted that earnings would continue to recover in 2024, with earnings per share increasing 7% year-over-year. JPMorgan isn’t as bullish on earnings, which are typically a key driver of stock performance.
JPMorgan expects S&P 500 earnings to rise 2% to 3% year over year, resulting in earnings per share of $225 in 2024. The company notes that other targets for higher profits reflect an economy that is in an “early cycle” or “intra-cyclical cycle.” cycle,” a nod to the growing narrative that the Federal Reserve’s rate-hiking campaign will end without a recession.
But Lakos-Bujas points out that household savings are falling, borrowing costs for both consumers and businesses are at multi-decade highs and global demand is cooling amid disinflation.
“As a result, we expect another year of below-trend earnings growth with sequentially lower revenue growth rate, no margin expansion and lower shareholder distributions,” the JPMorgan team wrote.
The story goes on
European brown bear (Ursus arctos) chasing away seagulls in the taiga, Karelia, Finland, Scandinavia. (Photo by: Arterra/Universal Images Group via Getty Images) (Arterra via Getty Images)
While many on Wall Street believe earnings may have turned around, JPMorgan joins economists who have suggested that higher borrowing costs will ultimately slow the U.S. economy in 2024. A new Federal Reserve report released Wednesday suggested the slowdown may already be underway.
JPMorgan also noted that the outlook for both consumers and borrowing costs was worsening in recent comments from management teams during conference calls. According to JPMorgan’s work, sentiment around the cost of capital hasn’t been this bad since the Great Financial Crisis.
“Without significant monetary or fiscal policy support, we see consensus growth assumptions at this point [as] more hopeful than realistic,” the JPMorgan team wrote.
Charts from JPMorgan show both consumer and credit sentiment shrinking. (JPMorgan Global Equity Macro Research)
Josh Schafer is a reporter for Yahoo Finance.
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