Marko Kolanovic, former J.P. Morgan chief strategist, has cautioned that the S&P 500 could dramatically fall to the high 3,000s if a significant recession occurs. He points to “enormous levels of uncertainty” reminiscent of the 2008 Global Financial Crisis or the COVID-19 pandemic.
Kolanovic highlights concerning indicators such as a prolonged yield curve inversion, weakening consumer sentiment, increasing defaults, and an escalating global trade war. He suggests that markets have not fully recovered from the 2020 pandemic shock due to extensive fiscal and monetary stimulus.
Despite market rallies in 2024 driven by AI and stimulus hopes, Kolanovic believes these gains mask underlying fragilities. He warns that if earnings decline and the price-to-earnings ratio drops to around 15x, the S&P 500 could plummet to the high 3,000s or low 4,000s. Kolanovic's analysis, published on The Last Bear Standing, emphasizes the high probability of a recession and advises investors to proceed with caution, given the current optimistic market valuations in the face of significant economic and geopolitical challenges.