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2024 could be ‘catch-22’ for markets: JPM
JPMorgan (JPM) is warning investors of a “catch-22 situation” for the US market next year.
According to the analysts Marko Kolanovic, a market announcement will not be established if the Federal Reserve does not reduce the interest rate.
“This is a catch 22 situation, where risky assets cannot have a sustainable investment in this situation of limited funds, and it is likely that there will be no guaranteed settlement until risky assets are corrected. (or a drop in prices due to, for example, weak. demand, thereby damaging profits),” Kolanovic wrote in the 2024 report, published on Friday.
“This means that we must first see the market collapse and the conflict in 2024 before the financial conditions are relaxed with a more sustainable campaign,” he said.
Kolanovic, who has been bullish on the rally this year, said he prefers bonds and cash to equities and other risky assets, writing in the report: “In the most certain case of the economy, we can see equity outperforming bonds (or cash) by around 5%, while in an environment of declining growth or bankruptcy, they can lose cash flow by ~20%.
“Regardless of whether a recession occurs or not, ex-ante, the risk-reward in equities and other risky assets is worse than in cash or debt.”
However, the market continues to rise in 2023 with the S&P 500 (^GSPC) up 20% since the beginning of the year. The Dow Jones Industrial Average (^DJI) and tech-heavy Nasdaq Composite (^IXIC) are up about 9% and 38%, respectively, over that same period.
Treasury yields, meanwhile, were set at record highs earlier this fall but have since retreated. The yield on the 10-year note (^TNX) is currently trading at 4.27% after 5% in October.