Prepare for the S&P 500 to plunge 23% by mid-2024

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JPMorgan’s head of technical technique sees the S&P 500 falling by 23% to three,500 factors by the center of subsequent yr.Brendan McDermid/Reuters

  • The S&P 500 is more likely to tumble 23% to three,500 factors by mid-2024, JPMorgan’s charts guru says.

  • Jason Hunter, the financial institution’s head of technical technique, views a US recession as very seemingly.

  • Hunter sees money and Treasury bonds are safer bets than shares at the moment.

Put together for the S&P 500 to crash 23% by subsequent summer season and a recession to take maintain, JPMorgan’s high charts guru has warned.

The inventory market is mistakenly pricing in a “mushy touchdown” for the US financial system, the place the Federal Reserve succeeds in crushing inflation with out inflicting a recession, Jason Hunter informed CNBC’s “Squawk Field” on Monday. However buyers will quickly notice the outlook is darker than they thought, sparking a sell-off in shares, the financial institution’s head of technical technique mentioned.

“You have a tendency to seek out your method right into a bear market that is ultimately related to a recession method most of the time,” Hunter mentioned, pointing to the at the moment inverted yield curve as a dependable indicator of financial ache. “The percentages are stacked in favor of a tough touchdown, really.”

The Fed has hiked rates of interest from almost zero final spring to north of 5% at the moment in a bid to curb historic inflation. Many inventory buyers are betting the US central financial institution will minimize charges subsequent yr, boosting asset costs and stimulating progress. Nevertheless, they might be too optimistic because the Fed is unlikely to loosen its financial coverage till the financial system cools.

“We will need to go to stall pace,” Hunter mentioned. “That is what allows the Fed to start out easing within the second half of the yr.”

“The market’s going to have a major intestine examine of whether or not inertia’s going to hold to a recession or not,” he continued. “Shares ought to pull again.”

The benchmark S&P 500 index is more likely to droop to three,500 by the center of subsequent yr in a “retest of the lows” of 2022, Hunter mentioned. His signaling algorithms are already flashing crimson, suggesting buyers ought to pare their inventory positions and begin to hedge, he famous. Money and 2- or 5-year Treasuries look far safer to him than equities at the moment, he added.

Extra positively, Hunter prompt that shares, buoyed by decrease rates of interest, may register recent highs in 2025.

Wall Avenue strategists are divided over the place the market is headed from right here. For instance, RBC’s head of US fairness technique, Lori Calvasina, informed Yahoo Finance on Monday that the S&P 500 may hit a document excessive of 5,300 factors subsequent yr.

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