Analysts at JPMorgan Chase (JPM) have issued a bearish note to clients, saying that stocks are likely to peak and then fall over the course of the summer.
JPMorgan strategists led by Marko Kolanovic, one of Wall Street’s biggest bears, are warning that equities are likely to peak in coming weeks and then slump in July and August.
“Profit margins are peaking, top-line growth is weakening, net interest expense is set to move back up, valuations are rich and sentiment/positioning are near highs,” wrote Kolanovic in a note to the bank’s clients.
JPMorgan also said that investors holding out hopes for a July or September interest rate cut from the U.S. Federal Reserve are likely to be disappointed.
“U.S. inflation can prove sticky, even as growth is moderating, which is not a great combination,” wrote Kolanovic.
JPMorgan reiterated its forecast for the benchmark S&P 500 index to finish this year at or around 4,200. That would mark a 20% decline from current levels.
Kolanovic stated in the bank’s analysis that it’s “possible, but historically and statistically unlikely, that this time is different and that high valuations of risk assets are justified.”
Data included in the note to clients shows that U.S. equities are currently at their highest level in a dozen years.
Kolanovic concludes the note by stating that he remains bullish on commodities and that Brent crude oil, the international standard, could gain $10 U.S. a barrel by September of this year.
The stock of JPMorgan Chase has risen 45% in the last 12 months and currently trades at $201.82 U.S. per share.
