JPMorgan Chase’s Chief Global Equity Strategist has warned the impressive rally witnessed in the US stock market over the past month may lose momentum by the end of next year.

In a recent note, Dubravko Lakos-Bujas outlined several economic challenges, including slowing economic growth, depleting household savings, and ongoing geopolitical turmoil, which could contribute to a significant decline in the S&P 500 throughout 2024.

The note highlights the potential for a challenging macro backdrop for stocks in the coming year, citing softening consumer trends, particularly if the Federal Reserve doesn’t implement rapid easing.

Lakos-Bujas wrote: “Absent rapid Fed easing, we expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed.”

The JPMorgan strategists predict that the benchmark index could fall to 4,200 by the end of 2024, marking an eight percent drop from current levels.

This forecast stands out as the most declining among major Wall Street firms, with even Morgan Stanley’s Chief US Equity Strategist, Michael Wilson, expecting the S&P 500 to end 2024 around 4,500.

Dwindling household savings, elevated borrowing costs, and cooling global demand are identified as key factors contributing to this less optimistic projection.

Lakos-Bujas emphasizes that without significant monetary or fiscal policy support, current growth assumptions may be more hopeful than realistic.

This cautionary outlook follows a volatile year for the stock market, with mid-2023 witnessing a downturn in all three major indexes due to concerns about the Federal Reserve potentially raising interest rates higher and for a longer duration than previously anticipated.

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Despite these concerns, the market has rebounded, with the S&P 500 showing an almost 11 percent rise since hitting bottom at the end of October.

Throughout the year, the benchmark index has seen an overall gain of nearly 20 percent, the Dow Jones Industrial Average has surged over 36 percent, and the Nasdaq Composite, representing the tech-heavy sector, has also experienced an approximately 36 percent increase.

While the recent market recovery has been notable, the note suggests the economic landscape may face headwinds such as rising borrowing costs, dwindling savings, and global economic uncertainties, which could challenge the optimistic growth assumptions currently in place.

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