JPMorgan expects a 20% drop in the S&P 500

An analyst from JPMorgan Chase & Co. Marko Kolanovich expressed concerns about the Fed's high interest rates and their potential impact on the risk of recession in the United States. 

Kalanovich also warned about the possibility of a «bearish» trend in the US stock market. The analyst stressed that there is still no clear understanding of how to avoid a recession at such a level of interest rates.

The S&P 500 index closed at 4,258.19 points on Thursday and may end the fifth week in a row with negative dynamics. Over the past month, the index has lost more than 5% of its value. Kolanovich believes that in the near future the market can hope for recovery, but much will depend on incoming macroeconomic indicators.

Nevertheless, the analyst warns about the possible risks of a 20% decline in the S&P 500 index, especially for the shares of the «magnificent seven» – the largest IT companies by capitalization, such as Apple Inc., Amazon.com Inc., Meta, Alphabet Inc., Nvidia Corp., Tesla and Microsoft Corp. Over the current year, the stock prices of these companies have increased by 83%, contributing to the growth of the S&P 500 index by 11%.

Kolanovich also noted that the labor market currently remains strong, but indicators of overdue payments on credit cards and car loans indicate financial difficulties among consumers. At the end of last year, the analyst predicted that the S&P 500 index would end 2023 at 4,200 points.