top of page
  • Writer's pictureThe San Juan Daily Star

JPMorgan Strategists See ‘Challenging’ Backdrop for US Stocks in 2024

J.P. Morgan equity strategists on Wednesday issued a dour outlook for U.S. stocks for the year ahead, pointing to weak expected earnings growth, expensive valuations and high geopolitical risks.

The bank projected a 2024 price target for the benchmark S&P 500 of 4,200, or about 8% below current levels.

Absent rapid easing of monetary policy by the Federal Reserve, “we expect a more challenging macro backdrop for stocks next year,” J.P. Morgan’s Dubravko Lakos-Bujas and his team said in an outlook report on Wednesday.

The firm expects S&P 500 earnings growth of 2% to 3% in 2024 -- a rate that’s well below the consensus analyst estimate of 11.4% growth next year, according to LSEG data.

Consensus earnings-per-share estimates are in sync with assumptions of a “Goldilocks” environment that sees inflation cool without a significant hit to demand and pricing power, the firm said in its report.

“In contrast to this robust outlook, we expect lower sequential revenue growth, no margin expansion, and lower buyback executions,” the strategists wrote.

Current valuations are “rich,” J.P. Morgan said, “especially 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 U.S., which the strategists expect will drive equity volatility to be generally higher in 2024 than in 2023.

Several policymakers this week have pushed back against rate cut expectations, with some stressing on a data-dependent approach to monetary policy.

Richmond Fed President Thomas Barkin on Thursday said that while there’s been “real progress” on inflation, it is yet unclear if the U.S. central bank will need to push its policy rate higher to finish the job

“We have had rates roll over here a little bit and I think that’s one of the reasons we have seen this rally over the last couple of weeks,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “If you think this rally has legs, yesterday gave you an opportunity to go buy some stocks today.”

Friday Moody’s lowered its outlook on the U.S. credit rating to “negative” from “stable”, citing large fiscal deficits and a decline in debt affordability.

This added to investor reluctance to make big decisions ahead of a weekend deadline that could result in a U.S. government shutdown, O’Rourke said.

U.S. House of Representatives Speaker Mike Johnson unveiled a Republican stopgap spending measure on Saturday aimed at averting a shutdown, but the measure quickly met opposition from lawmakers from both parties in Congress.

The Dow Jones Industrial Average rose 52.18 points, or 0.15%, to 34,335.28, the S&P 500 lost 0.82 points, or 0.02%, to 4,414.42 and the Nasdaq Composite dropped 12.31 points, or 0.09%, to 13,785.80.

The major U.S. stock indexes had rebounded so far this month, fueled by a stronger-than-expected earnings season and hopes that U.S. interest rates are near their peak.

Traders have priced in a nearly 86% chance that the Fed will hold interest rates in December, according to the CME Group’s FedWatch tool.

Among the S&P 500’s 11 major sectors energy was the biggest gainer, up 0.7%, while utilities was the biggest loser, down more than 1%.

Medtech companies were rising with Dexcom adding 5%, Insulet climbing more than 6% and Abbott rising 2% as analysts commented on data about the cardiovascular benefits for Novo Nordisk’s weight-loss drug Wegovy.

Advancing issues outnumbered declining ones on the NYSE by a 1.08-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored decliners.

17 views0 comments

Recent Posts

See All

Wall Street wavers ahead of key inflation data

Wall Street’s main indexes were mixed on Tuesday as investors awaited a crucial inflation report and other economic data that would offer further clues on the timing of rate cuts from the Federal Rese

bottom of page