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Wall Street’s biggest bear explains what needs to happen for the stock market to avoid a 23% correction

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Wall Street's biggest bear explains what needs to happen for the stock market to avoid a 23% correction
Marko Kolanovic Top 100
Wall Street’s biggest bear explains what needs to happen for the stock market to avoid a 23% correction – Marko Kolanovic of JP MorganHollis Johnson/Insider
  • JPMorgan’s Marko Kolanovic expects the S&P 500 to fall 23% by the end of 2024.
  • Kolanovic explains what needs to happen for stocks to avoid this grim outcome.
  • Other strategists have become more optimistic lately as the market approaches new all-time highs.

Wall Street’s biggest bear isn’t backing down from his bleak outlook for the stock market the major indices continue to reach record highs.

But JPMorgan Marko Kolanovic, the chief global market strategist, is offering investors a “what could go right” scenario that would prevent his bearish outlook from becoming a reality.

Kolanovic has a year end of 2024 S&P500 price target of 4,200, which represents a potential downside of 23% from current levels and also the lowest price target on Wall Street.

“Our cautious stance is based on our view that there is no positive revaluation, and therefore any upside potential must come from earnings growth, which we believe is insufficient to warrant equity risk even under best-in-class assumptions scenario,” Kolanovic said. said in a note Monday.

Kolanovic has forecast sub-par earnings growth for the S&P 500, suggesting the index’s earnings per share will reach just $225 in 2024, compared to $221 in 2023.

That’s well below Wall Street forecasts of $240 per share and below the S&P 500’s 12-month earnings per share of $228 per share, Bloomberg data shows.

Here’s what needs to happen for the stock market to avoid a 20% selloff, the note said.

“For stocks to avoid a correction of more than 20%, you have to believe that technology will become a much more meaningful growth engine for the broader economy in the near term,” Kolanovic said.

But Kolanovic doesn’t believe this bullish outlook and instead advises investors to remain patient before putting money to work.

“While we believe technology will remain the key driver of economic growth in the coming years, we do not believe its impact on business results across the board will suddenly be so profound, which is why we remain cautious here and expect economic grow. need to weaken, stocks need to correct and investors need to find a better entry point,” he wrote.

Kolanovic’s bearish position on the stock market wasn’t always so lonely, but recently a chorus of more bearish stock strategists have changed their tune.

On Monday, Evercore ISI strategist Julian Emanuel said raised his price target for the S&P 500 to a street-high 6,000 versus his previous target of 4,750, representing a 26% swing.

Last month, Morgan Stanley CIO Mike Wilson, who has long held a bearish view of the stock market, said: turned bullish and raised his price target for the S&P 500 to 5,400 from its previous target of 4,500.

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