Stocks could be in 'panic' mode in 2024, warns JPMorgan
JPMorgan analysts offered fresh comments about the outlook for financial markets for the next year. The famous strategists anticipate “another challenging year for market participants.”
JPMorgan economists anticipate a softening in both inflation data and economic activity in 2024. The question arises whether investors and risky assets should welcome a decline in inflation, leading to increased demand for bonds and stocks, or if the decrease in inflation signals a potential economic recession.
“We think that the decline in inflation and economic activity that we forecast for 2024 will at some point make investors worry or perhaps even panic,” analysts wrote in a note.
The primary concern stems from the interest rate shock observed over the past 18 months, which is anticipated to have a negative impact on economic activity. Moreover, geopolitical developments pose challenges, affecting commodity prices, inflation, global trade, and financial flows.
Despite these factors, the bank notes that valuations of risky assets are, on average, expensive.
The bank’s forecasts suggest that the Federal Reserve could begin easing in the second half of 2024, potentially at a pace of 25 basis points per meeting.
In the scenario of a gradual economic slowdown, the decline in bond yields is expected to be led by the midsection and eventually the front end of the yield curve.
The forecasts also indicate that the U.S. 10-year note yield could decrease to 3.75% over the next year, with the possibility of further decline if the economy enters a recession.
Along these lines, JPMorgan sees the case for a stronger dollar.
“Currency carry trades, that attracted significant inflows and performed very well this year, would likely give back some
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