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JPMorgan’s head of technical strategy, Jason Hunter, is cautioning investors to brace for a significant market correction, predicting a 23% plunge in the S&P 500 by mid-2024 and anticipating the onset of a recession in the US.
In an interview with CNBC’s “Squawk Box,” Hunter challenged the prevailing notion of a “soft landing” for the US economy, where the Federal Reserve successfully curbs inflation without triggering a recession. He argued that investors are underestimating the potential downside risks, and a more pessimistic outlook will likely prompt a sell-off in stocks.
Hunter emphasized the significance of the inverted yield curve as a reliable indicator of economic challenges, suggesting that historical patterns indicate a bear market and recession are more likely outcomes. Despite widespread expectations for a rate cut by the Fed to stimulate growth, Hunter expressed skepticism, noting that the central bank is unlikely to loosen its monetary policy until the economy shows signs of cooling.
Anticipating a “hard landing,” Hunter stated, “We’re going to have to go to stall speed,” referring to the point at which the economy slows down enough for the Fed to consider easing in the second half of the year. He warned of a “significant gut check” for the market, indicating a potential pullback in stocks.
According to Hunter, the S&P 500 index is expected to retest the lows of 2022, reaching 3,500 points by the middle of next year. His signaling algorithms are reportedly indicating a red flag, prompting him to advise investors to reduce stock positions and consider hedging. Hunter identified cash and 2- or 5-year Treasuries as safer alternatives compared to equities in the current market environment.
On a more optimistic note, Hunter suggested that, supported by lower interest rates, stocks could experience a rebound and achieve new highs in 2025.
While Hunter’s forecast is notably bearish, it contrasts with other Wall Street strategists’ views, highlighting the ongoing debate about the future direction of the market. Lori Calvasina, RBC’s head of US equity strategy, recently expressed a more bullish outlook, predicting the S&P 500 could reach a record high of 5,300 points in the coming year.
