JPMorgan predicts a grim outlook for the stock market next year

The significant rebound in united states stock market last month will likely fizzle out by the end of next year amid a series of growing economic headwinds, according to JPMorgan Chase.

Dubravko Lakos-Bujas, chief global equity strategist at JPMorgan, said in a recent analyst note that slowing economic growth, rapid depletion of household savings and the current geopolitical turmoil could trigger a sharp decline in the S&P 500 over the course of 2024.

"Absent rapid easing from the Fed, we expect a more challenging macroeconomic backdrop for stocks next year with weaker consumer trends at a time when investor positioning and sentiment have largely reversed." "Lakos-Bujas wrote in the note.

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The benchmark could fall to 4,200 by the end of 2024, about 8% lower than current levels, according to JPMorgan strategists. It's the most bearish outlook yet among Wall Street's major companies. Even Morgan Stanley's chief stock strategist in the US. michael wilson —a longtime Wall Street bear—forecasts the S&P 500 to end 2024 around 4,500.

"We expect a more challenging macroeconomic backdrop for stocks next year, with weaker consumer trends at a time when investor positioning and sentiment have largely reversed," the JPMorgan note said.

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Declining household savings, high borrowing costs hovering around the highest level in decades and cooling global demand are to blame for this lackluster projection, Lakos-Bujas wrote.

"In the absence of significant monetary or fiscal policy support, we see consensus growth assumptions at this time. [as] more hopeful than realistic," he wrote in the note.

The grim forecast comes after a volatile year for the stock market.

All three indices fell in mid-2023 amid fears that the Federal Reserve would raise interest rates more than previously expected and keep them at high levels for longer. But they quickly recovered from those losses: The S&P 500 is up nearly 11% since bottoming in late October.

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The benchmark index is up nearly 20% since the beginning of the year, while the Dow Jones Industrial Average is up more than 36%. Meanwhile, the tech-heavy Nasdaq Composite is also up about 36%.