Stock Market Will Get Worse In 2023 Before It Gets Better, JPMorgan Says

JPMorgan Chase analysts predicted in a Thursday note, despite a steady pace of mildly encouraging data indicating softening inflation and an impending slowdown in the Federal Reserve’s most aggressive tactics in recent weeks.The JPMorgan team, led by Dubravko Lakos-Bujas, wrote it expects the S&P 500 to “re-test this year’s lows” in the first half of 2023, implying a 14% decline for the S&P from its Thursday level.

The bank cited a “proverbial snowball” of high borrowing costs, a deterioration in consumer savings and a rise in unemployment will contribute to the market’s poor start. But that stream of bad news should then inspire a Fed pivot to lower interest rates, according to JPMorgan, predicting the S&P will end next year at 4,200, a modest 3.6% gain from where it currently stands.

Several other banks also expect a tepid beginning to 2023 for the market, with UBS strategists predicting last month a “base-case” scenario of 3,700 for the S&P by next June, implying 9% downside, while Goldman Sachs analysts noted Monday the market is currently baking in only an 11% chance of a recession over the next year, compared to a 39% probability in Goldman’s market-based recession model.

Predictably, all eyes will continue to be on the Fed, which is largely expected to raise the federal funds rate a further 100 basis points in coming months, with JPMorgan analysts writing their forecast “largely depend[s] on the depth and length of the recession and the speed of the Fed’s counter-response.

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