Stock market forecast: JP Morgan warns 20-30 percent dip, favours small caps
- JP Morgan's note suggests that investing in small-cap stocks could offer favourable opportunities.
- Note warns of heightened volatility and elevated risks, including the possibility of an economic recession.
- ICICI Direct has forecasted a potential surge in the Indian stock market.
Despite expectations of various global indices reaching new highs, JP Morgan’s equity strategists caution that the market’s upward trajectory may be short-lived, with a looming risk of a significant dip.
Potential volatility and risksCopy link to section
According to analysts at JP Morgan, the stock market could experience a downturn of approximately 20 to 30 percent following a peak in 2024.
The note highlights concerns about heightened volatility and elevated risks, including the possibility of an economic recession and an inverted yield curve.
Moreover, the analysts identify risks associated with large-cap stocks reaching inflated values.
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Low yield spreadsCopy link to section
Of particular concern are historically low yield spreads despite central banks’ interest rate hikes.
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The analysts also point out that current corporate balance sheets are weaker compared to pre-2008 recession levels, adding to market uncertainties.
Cautious approachCopy link to section
JP Morgan’s strategists emphasize the importance of caution in navigating the market, citing past instances of irrational market behaviour.
They stress the need for investors to make informed and measured decisions amidst evolving market conditions.
Implications for global stocksCopy link to section
JP Morgan’s cautionary stance provides insight into the potential decline in global stocks in the coming months, urging investors to exercise prudence in their investment strategies.
India’s stock market prospectsCopy link to section
Meanwhile, ICICI Direct has forecasted a potential surge in the Indian stock market, especially with 2024 being an election year.
Predictions suggest that the NSE Nifty index could reach 23,400 points by June 2024.
Historically, election years have seen median market returns of 17 percent, prompting investors to consider market dips during February-March as potential buying opportunities.
ICICI Direct anticipates an outperformance of PSU Bank stocks in the coming months and advises investors to monitor IT stocks despite current market fluctuations.
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