As the US central bank continues to raise rates from nearly zero to almost 5%, the outlook for the stock market is uncertain.[0] Investors are concerned that higher rates could curb price growth and crimp demand, while sapping economic growth.[0] Marko Kolanovic, a strategist at JPMorgan Chase & Co., has declared that he is becoming more cautious, suggesting that investors should not join in on the stock market rally of this year as “the possibility of a recession is not taken into account in the values of stocks.”[1]
According to Kolanovic, it is likely that an economic downturn will be required in order to bring inflation back to the Federal Reserve’s goal of 2%. Moreover, there is only a small chance that the stock market will experience any increase in value. He cautioned that a recession will “eventually be necessary” to bring inflation back to central-bank targets and said the potential upside for markets is likely “fairly limited,” given stretched valuations and high rates.
On Tuesday, the U.S. Bureau of Labor Statistics reported that the consumer-price index increased by 0.5% in January, resulting in a year-over-year rate of 6.4%.[2] Government data released on Friday revealed that the US added 517,000 jobs in January, far exceeding the 185,000 nonfarm payrolls estimate predicted by economists surveyed by Bloomberg.[3] The US unemployment rate dropped to 3.4%, its lowest point in over half a century.[3]
Jeremy Siegel, a professor at Wharton, anticipates a rise in stock prices and a decrease in house prices.[0] He stated in the interview that the tremendous tightening, one of the greatest in history, has yet to be felt in its effects.[4] I suggest that they cease their actions at this point; I believe there is sufficient proof that prices have dropped, which means they could take a break and monitor the situation.[4] The experienced professor once again expressed his opinion that the Dow Jones Industrial Average stock index will increase by 18%, reaching 40,000 points by the year 2025.[5]
Morgan Stanley strategists warned that earnings expectations for 2023 are still about 20% too high, and stocks could plunge 24% in the first half of the year as companies feel the pinch of tighter financial conditions.[6] According to Wilson, the price is extremely disconnected from reality during this bear market.[7] Year-to-date, the S&P 500 has seen an impressive increase of nearly 9%, and it has risen approximately 20% since its low point in[8]
0. “Wharton’s Siegel: Stocks will keep surging, house prices will tumble” Markets Insider, 9 Feb. 2023, https://markets.businessinsider.com/news/stocks/jeremy-siegel-wharton-stocks-house-prices-market-outlook-predictions-fed-2023-2
1. “JPMorgan’s Kolanovic Urges Investors to Ditch Stocks for Bonds” Financial Post, 13 Feb. 2023, https://financialpost.com/pmn/business-pmn/jpmorgans-kolanovic-urges-investors-to-ditch-stocks-for-bonds
2. “‘Underlying bullish tenor’: U.S. stocks fare surprisingly well as Treasury yields rise after hotter-than-expected inflation, says Morgan Stanley’s Andrew Slimmon” MarketWatch, 14 Feb. 2023, https://www.marketwatch.com/story/underlying-bullish-tenor-u-s-stocks-fare-surprisingly-well-as-treasury-yields-rise-after-hotter-than-expected-inflation-says-morgan-stanleys-andrew-slimmon-76c0299d
3. “‘Edge of a swamp’: JPMorgan strategist sees ‘one time only sale’ in fixed income as U.S. economy slows” MarketWatch, 7 Feb. 2023, https://www.marketwatch.com/story/edge-of-a-swamp-jpmorgan-strategist-sees-one-time-only-sale-in-fixed-income-as-u-s-economy-slows-11675774251
4. “Wharton professor Jeremy Siegel warns the blowout US jobs report may be bad news for stocks – and could lead t” Business Insider India, 6 Feb. 2023, https://www.businessinsider.in/stock-market/news/wharton-professor-jeremy-siegel-warns-the-resilient-us-economy-may-be-bad-news-for-stocks-and-could-lead-to-a-recession-this-year/articleshow/97648621.cms
5. “Wharton’s Siegel: strong US jobs data may hit stocks, lead to recession” Markets Insider, 6 Feb. 2023, https://markets.businessinsider.com/news/stocks/wharton-siegel-jobs-report-economy-stock-market-outlook-fed-recession-2023-2
6. “The stock market has runway to continue its rally until April – and then investors should expect to feel the pain of weak …” msnNOW, 8 Feb. 2023, https://www.msn.com/en-us/money/markets/the-stock-market-has-runway-to-continue-its-rally-until-april-and-then-investors-should-expect-to-feel-the-pain-of-weak-corporate-earnings-veteran-strategist-says/ar-AA17fPzp
7. “Morgan Stanley Strategists Say Stocks Ignore Fed, Earnings Reality By Bloomberg” Investing.com, 13 Feb. 2023, https://www.investing.com/news/stock-market-news/morgan-stanley-strategistssaystocks-ignore-fed-earnings-reality-3001446
8. “The stock market’s risk-reward is as bad as it’s been during this bear market as the Fed keeps hiking into an” Business Insider India, 13 Feb. 2023, https://www.businessinsider.in/stock-market/news/the-stock-markets-risk-reward-is-as-bad-as-its-been-during-this-bear-market-as-the-fed-keeps-hiking-into-an-earnings-recession-morgan-stanley-says/articleshow/97885581.cms