In a departure from the prevailing optimism on Wall Street, JPMorgan’s global equity strategy team has released a 2024 outlook projecting a less-than-rosy future for the S&P 500. According to JPMorgan’s 2024 Projections the benchmark index is poised conclude the year at 4,200, representing an approximate 8% decline from its position on the preceding Wednesday.
JPMorgan’s 2024 Projections are rooted in the absence of rapid Federal Reserve easing, as highlighted by JPMorgan equity strategists led by Dubravko Lakos-Bujas. They foresee a challenging macroeconomic backdrop for stocks in the upcoming year, citing softening consumer trends and a reversal in investor positioning and sentiment. The report underscores the current rich valuation of equities coupled with historically low volatility, while geopolitical and political risks loom large.
JPMorgan’s 2024 projections sharply contrast with other forecasts on Wall Street, notably that of Morgan Stanley’s Mike Wilson, a noted bear in recent years. Wilson envisions the S&P 500 reaching 4,500 by the close of 2024, underpinned by an optimistic outlook on earnings.
In Wilson’s 2024 outlook, he predicts a continued rebound in earnings, with a 7% increase in earnings per share compared to the previous year. However, JPMorgan diverges from this optimism, forecasting a more modest 2% to 3% growth in S&P 500 earnings, resulting in earnings per share of $225 in 2024. The report contends that this discrepancy is a reflection of an economy in an “early-cycle” or “intra-cycle” phase, a nod to the prevailing narrative that the Federal Reserve’s interest rate hikes will conclude without triggering a recession.
Lakos-Bujas, leading the JPMorgan team, underscores concerning economic indicators, including falling household savings, multi-decade high borrowing costs for both consumers and corporates, and a cooling global demand amid disinflation. The team expresses a cautious outlook, assuming another year of below-trend earnings growth with sequentially lower revenue growth rates, no margin expansion, and diminished shareholder payouts.
While some on Wall Street anticipate a positive turn in earnings, JPMorgan aligns with economists who emphasize that higher credit costs will eventually impede the US economy in 2024. A recent report from the Federal Reserve, released on Wednesday, appears to corroborate this, indicating that the slowdown might already be in progress.
JPMorgan’s report also draws attention to recent commentary from management teams during earnings calls, which portrayed a deteriorating outlook for both consumers and the cost of credit. The sentiment surrounding the cost of capital, according to JPMorgan’s analysis, hasn’t been this low since the Great Financial Crisis. The JPMorgan team further emphasizes that, in the absence of significant monetary or fiscal policy support, the current consensus growth assumptions appear more hopeful than realistic.
In conclusion, JPMorgan’s 2024 projections not only stand as a contrarian viewpoint in the current landscape of market optimism but also serve as a stark reminder of the potential challenges and uncertainties that lie ahead for investors in the coming year.
Source: Yahoo Finance
