S&P 500 Index Could Post 30% Rise to Reach 4,900 by End of The Year - Analysts

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The benchmark US stock index, the S&P 500, plunged 20 percent this year having been pummeled by inflation, recession fears and geopolitical uncertainties. However, JPMorgan believes scaremongers are wrong about an impending crash. Instead, the investment bank's analysts say that a rebound for the US stocks is on the horizon.

'US Recession are Overblown'

According to JPMorgan's global head of equity macro research, a nearly 30 percent rise in the index this year is possible. His projection is that the S&P 500 index, which is currently in the range of 3,800, could likely rise to 4,900 by the end of the year, Yahoo Finance reported.

New York Stock Exchange
New York Stock Exchange Wikimedia Commons

The logic is that the fears of a US recession are overblown. "People are basically positioned for a recession. Our base case is that this is not going to be a recession in the next 12 months ... And we think from that angle the portfolios are wrong footed," Dubravko Lakos has said.

This rosy view runs counter to market-wide pessimism, though. At the start of the month, analysts at Bank of America warned that a 'recession shock' has begun for markets. The warning was issued after data showed Wall Street stocks suffered the worst half-year losses in more than 50 years.

Punishing Months

According to BofA Chief Investment Strategist Michael Hartnett, the bank's 'bull and bear indicator' remains at maximum bearish for a straight third week. According to BofA estimates, a whopping $5.8 billion exited global stock funds in the week ending June 29. The sell-off is the result of hawkish central bank action worldwide amid runaway inflation, which is stoking fears of an imminent recession in the world's largest economy and elsewhere.

US stocks
People queue beside the bronze bull in the Financial district which has become a Wall Street icon in New York City, July 18, 2013. U.S. stocks continued to rise on Thursday, sending the Dow Jones Industrial Average and the S&P 500 to fresh all-time highs, boosted by upbeat economic data and corporate earnings. IANS

The last six months have been punishing for stock market investors, especially those in the US. The benchmark S&P 500 index lost 20.6 percent in the last six months, which is the steepest half-yearly loss for the US stocks since 1970.The index also breached the bear market territory, having lost more than 21 percent from the January high.

Meanwhile, the Dow Jones Industrial Average dropped more than 15 percent in the first half of 2022, which is its biggest plunge since 1962.

For the quarter, the S&P 500 plunged more than 16 percent, which is its biggest drop since March 2020. While the Dow lost 11 percent in the second quarter, the Nasdaq plunged losing 22.4 percent, the steepest quarterly fall since 2008.

Nomura Holdings
Nomura Holdings Wikimedia Commons

Some analysts estimate that the S&P 500 can potentially drop another 20 percent if the country slips into recession.

The Other View

Economists at brokerage firm Nomura Holdings said on Monday that the US, UK, Japan and Europe will be in recession by the end of the year.

"Right now central banks, many of them have shifted to essentially a single mandate — and that's to get inflation down. Monetary policy credibility is too precious an asset to lose. So they're going to be very aggressive .... That means front loading rate hikes. We have been pointing for several months about the risks of a recession and we've bitten the bullet. And now we have many of the developed economies actually falling into recession," said Rob Subbaraman, chief economist at Nomura told CNBC.