MW JPMorgan says the stock market may need more time to get to its year-end target

By Steve Goldstein

The bulls are getting nervous.

And to be fair, JPMorgan really was a reluctant bull anyway. The bank parted ways with Marko Kolanovic after his bearish views didn't materialize, and its new team was only midtable by Wall Street standards with its view that the S&P 500 would end the year at 6,500.

That's certainly not impossible at this stage but would require a 13% advance from here, after the 1.8% drop in the S&P 500 SPX on Thursday that left the key stock-market gauge at 5,738.52.

"We maintain our year end price target of 6500, but acknowledge that there is a large standard error around this forecast and the possibility that S&P 500 may not reach this level until 2026," say strategists led by Dubravko Lakos-Bujas.

For now, they expect the S&P 500 to be range bound, between 5,200 and 6,000, but then to pick up later in the year.

The JPMorgan team still don't see a recession, calling it a low risk. "Markets are responding to policy induced growth fears and quickly readjusting lower borrow rates, oil, and [the U.S. dollar], all of which should be supportive for risk assets and help release pent up demand (e.g. housing, retail, autos, etc)," they say.

The yield on the 10-year Treasury BX:TMUBMUSD10Y, which tends to be the driver of mortgage rates, is down nearly 30 basis points this year. Oil (CL00) has fallen 7% this year. The U.S. dollar index DXY has retreated 4% in 2025.

Already, markets expect nearly 3 Fed rate cuts this year, and if the outlook worsens significantly, the Fed could make even more reductions. "This policy easing would be in line with the Treasury secretary's goal of reducing rates, promoting growth without increasing inflation, and reducing the budget deficit," they say. The possibility of a Russia/Ukraine deal and lower commodity prices would also be another driver of lower inflation and yields.

Besides, they note, corporates and consumers can weather some shocks due to the solid earnings growth and labor market. They point out that it's rare for the cycle to roll over when credit markets are as resilient as they are.

Earnings also might be helped by a flurry of capital spending plans announced in the U.S., defense spending plans in Europe, easing in China and pro-growth reforms in Japan.

And finally, don't forget about AI - the artificial intelligence cycle continues to accelerate, innovate and broaden out, notably in the U.S. and China. "In our view, the Street is under appreciating the earnings growth potential from cost savings via productivity gains in the coming quarters-which is becoming apparent in some of the hyperscalers and software names," they say.

The analysts say investors should hold a barbell of bond proxies - i.e. utilities or consumer staples - and stocks that would benefit form lower rates, like regional banks and real estate. They did cut large-cap banks to neutral from overweight, while moving consumer discretionary to neutral from short.

Outside of the U.S., they see significant upside potential in China tech and internet companies.

-Steve Goldstein

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March 07, 2025 03:36 ET (08:36 GMT)

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