JP Morgan stubbornly refuses to "flip long": Avoiding a 23% plunge in US stocks with only a glimmer of hope

According to the financial news app Smart Finance, despite the major US stock indices continuing to hit new highs, Marko Kolanovic, the chief global market strategist at JPMorgan Chase, has not changed his bearish stance. However, Kolanovic has provided investors with a "potentially positive" scenario that could prevent his pessimistic predictions from becoming reality.

Kolanovic expects the S&P 500 index to reach 4,200 points by the end of 2024, which implies a potential 23% decline from current levels, making it the lowest target on Wall Street.

In a report on Monday, Kolanovic stated, "We are cautious because we believe there is no re-rating upside for US stocks, and any upside must come from earnings growth, which we believe is insufficient to justify stock risk even in the best case."

Kolanovic predicts that the earnings growth of the S&P 500 index will be below average, with earnings per share of the index reaching only $225 in 2024, compared to $221 in 2023.

According to Bloomberg data, this expectation is significantly lower than the Wall Street forecast of $240 and below the S&P 500 index's earnings of $228 over the past 12 months.

Kolanovic mentioned that in order to avoid a 20% drop in the US stock market, one condition must be met.

He said, "To avoid a market correction of more than 20%, you must believe that technology will become a more meaningful driver of overall economic growth in the short term."

However, Kolanovic does not share this optimistic outlook and advises investors to remain patient before committing funds.

He stated, "While we believe that technology will continue to be a key driver of economic growth in the coming years, we do not think it will suddenly have such a profound impact on the overall profitability of companies. Therefore, we remain cautious, expecting economic growth to slow down, the stock market to adjust, and investors to find better entry points."

Although Kolanovic is not the only one bearish on the US stock market, a recent group of bearish market strategists has changed their tone.

On Monday, Evercore ISI strategist Julian Emanuel raised the S&P 500 index target from the previous 4,750 points to 6,000 points, an increase of 26%.

Last month, Mike Wilson, the chief investment officer at Morgan Stanley, who had been bearish on the market for a long time, turned bullish and raised the S&P 500 index target from 4,500 points to 5,400 points