From last Friday to this Monday, the US stock market was immersed in a joyful atmosphere, with the S&P 500 index hitting a historic high, rising to 4850.43 points. But this is not enough to convince JPMorgan to abandon its bearish stance.
The bank pointed out in its latest report that "dismal" performance and high valuations mean investors should be cautious when buying stocks at current levels.
Dubrovko Lakos Bujas and Marko Kolanovic, strategists at Xiaomo, stated that although only a few S&P 500 index components have reported fourth quarter results so far, the quality is questionable.
According to this report, they expect consumer goods companies to point out in their upcoming performance report that the decrease in household savings has had a negative impact on performance, and economic growth is also slowing down.
JPMorgan Chase said, "We believe the stock market is facing a high threshold - in this financial reporting season, without strong corporate guidance that aligns with current high growth expectations, anything could potentially lead to 'punishment'."
The report suggests that high expectations for artificial intelligence (AI) companies may also cause pain in the stock market, as any slight disappointment in the profitability of technology companies could lead to a significant sell-off in the stock market.
They wrote in the report, "In terms of broader technology and artificial intelligence, there is a risk of significant sell-off in these stocks if expensive capital investments do not bring expected incremental returns or productivity improvements in the coming quarters."
In addition, another unfavorable factor facing the US stock market is that interest rates may remain high for a longer period of time, which the market did not anticipate as investors are increasingly preparing for a significant rate cut by the Federal Reserve. However, Xiaomo believes that any re acceleration of inflation or economic growth may challenge the view that interest rates will soon decline.
"The recent economic data and shipping disruptions have led the market to generally believe that the Federal Reserve will be very dovish, but this view carries risks. For example, is it too far to expect commodity inflation to normalize while service sector inflation remains stubbornly sticky, leading to high core inflation expectations?" asked Xiao Mo.
Finally, Goldman Sachs strategists still insist that the year-end target for the S&P 500 index is 4200 points, which may fall by about 13% from current levels, making this one of Wall Street's most pessimistic expectations.