by John Hugh DeMastri
Strategists at JPMorgan Chase predicted a recession as soon as the first half of 2023, coupled with a major stock market slide, in a research note Thursday, according to Bloomberg.
The strategists expected the S&P 500 stock index to decline roughly 12% in the first half of next year, before rebounding to end 2023 up 3% as inflation cools and the Federal Reserve slows or reverses its aggressive campaign of interest rate hikes, Bloomberg reported. Despite the expectation that the stock market will rebound by the end of next year, the analysts anticipated that U.S. corporate earnings would fall roughly 9% as demand slumps and economic conditions limit companies’ ability to set higher prices.
.@JPMorgan’s Elyse Ausenbaugh on the Fed: “Having these expectations set that they’re willing to let the unemployment rate rise… is something investors need to be paying attention to, and a key reason we do expect a recession to come to fruition in the second half of next year.” pic.twitter.com/Bu2y2ZjD7V
— Yahoo Finance (@YahooFinance) November 30, 2022
“We do not expect this year’s constructive growth backdrop to persist in 2023,” wrote the JPMorgan Chase team, led by chief U.S. equity strategist Dubravko Lakos-Bujas Thursday, according to Bloomberg. “Fundamentals will likely deteriorate as financial conditions continue to tighten and monetary policy turns even more restrictive.”
Researchers at Goldman Sachs predicted Wednesday that the odds of a significant economic contraction within the next year was roughly 39%, but investors had only adjusted risk asset prices in accordance with an 11% chance, potentially amplifying the damages caused by “recession scares.”
Bankim Chadha, chief U.S. equity and global strategist of Deutsche Bank, predicted the S&P 500 would decline roughly 19% from current levels in the first half of next year, before rebounding to surpass current levels by roughly 12.5% by the end of next year, a greater swing than the one estimated by JPMorgan Chase.
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