2023-11-29 20:14:26
Equity strategists at JP Morgan issued a bleak outlook for U.S. stocks for the year ahead on Wednesday, highlighting expected weak earnings growth, expensive valuations and high geopolitical risks.
The bank has forecast a 2024 price target of 4,200 for the benchmark S&P 500, regarding 8% below current levels.
Absent a rapid easing of monetary policy from the Federal Reserve, “we expect a more challenging macroeconomic backdrop for stocks next year,” JP Morgan’s Dubravko Lakos-Bujas and his team said in a report on the outlook published Wednesday.
The firm projects S&P 500 earnings growth of 2% to 3% in 2024 — well below analysts’ consensus estimate of 11.4% growth next year, according to LSEG data.
Consensus earnings per share estimates are in line with assumptions of a “Goldilocks” environment that sees inflation calming without demand and pricing power being significantly affected, a the cabinet said in its report.
“In contrast to this robust outlook, we expect weaker sequential revenue growth, no margin expansion, and weaker buyout executions,” the strategists wrote.
Current valuations are “high,” JP Morgan said, “particularly in light of the aging business cycle, restrictive monetary policy and geopolitical risks.”
Those risks include two major wars and 40 countries holding national elections, including the United States, which strategists say will lead to generally higher stock volatility in 2024 than in 2023.
Additionally, the strategists said a recession is “a real risk for next year, although investors are not yet pricing in this uncertainty consistently across geographies, styles and sectors.” . (Reporting by Lewis Krauskopf, editing by Nick Zieminski)
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