Just one day after Morgan Stanley CIO Mike Wilson abandoned his bearish stock market call, JPMorgan's Marko Kolanovic remains steadfast in his bearish stance.
Kolanovic, the last mega-bank bear on Wall Street, reiterated his view in a Monday note, predicting the S&P 500 will decline about 20% to 4,200, levels not seen since October.
"With very high equity valuations, we do not see equities as attractive investments at the moment and we don't see a reason to change our stance," Kolanovic stated.
US stocks have reached record highs over the past week, with the S&P 500 trading just above 5,300, reflecting a year-to-date gain of more than 11%.
Kolanovic acknowledged that his bearish view on stocks has negatively impacted the performance of his multi-asset portfolio over the past year. However, with interest rates likely to remain in restrictive territory for longer, coupled with lower-income consumers showing signs of weakness and high levels of geopolitical uncertainty, he believes now is not the time to turn bullish.
He also dismissed the idea that AI would save the stock market.
"We don't think that narrow themes like AI chips can compensate for all of those traditional market challenges that historically worked against the cycle," Kolanovic said.
In contrast, Morgan Stanley CIO Mike Wilson's shift from bearish to bullish was influenced by ongoing strength in corporate earnings and the expectation that earnings growth will accelerate in 2025 due to operating leverage.
Kolanovic, however, does not share this view. In his Monday note, he pointed out that for 2024 S&P 500 earnings to meet investor expectations, third- and fourth-quarter EPS growth would need to accelerate by 16% compared to the first quarter.
"That is unlikely, especially if the recent spell of softer activity dataflow continues," Kolanovic commented.
Kolanovic's forecasts have faced challenges over the past few years. The closely-followed Wall Street strategist was bullish on stocks for much of the 2022 bear market, only to turn bearish just before the market bottomed in mid-October 2022. Since then, Kolanovic has maintained a bearish outlook throughout 2023 and 2024, despite a rally of more than 40% in the S&P 500.
