Recession Alert! JPMorgan's Kolanovic Foresees 20% Market Downturn

JPMorgan’s JPM chief market strategist Marko Kolanovic is reportedly sounding the alarm, forecasting a 20% nosedive in the S&P 500, a storm brewed by the tumultuous winds of skyrocketing interest rates.

The strategist advises investors to consider the safety of cash, given the precarious market conditions that could usher in a recession, according to a CNBC news report.

Kolanovic suggests choosing cash at a 5.5% return in the money market, and short-term Treasurys is a crucial protection strategy right now.

The S&P 500 is teetering on the edge, with the specter of a five-week losing streak looming large. The index has already retreated over 5% in the past month.

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″We’re not necessarily calling for an immediate sharp pullback,” Kolanovic told CNBC. “Could there be another five, six, seven percent upside in equities? Of course... But there’s a downside. It could be 20% downside.”

However, Kolanovic suggests that the market could still experience a near-term bounce, contingent on upcoming economic reports.

Kolanovic specifically highlighted the vulnerability of the “Magnificent Seven” stocks, including Apple Inc. AAPL, Amazon.com Inc. AMZN, Meta Platforms Inc. META, Alphabet Inc. GOOGGOOGL, Nvidia Corporation NVDA, Tesla Inc. TSLA, and Microsoft Corporation MSFT. 

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These tech giants, having soared this year could potentially face steep losses amidst the high-rate environment, the report noted.

Kolanovic adds that consumers are getting “dangerously cash-strapped” due to the sluggish economic backdrop.

“The job market is still strong. But you are starting to see the stress in consumer if you look at sort of the delinquencies in the [ cards and auto loans,” he said, as noted by CNBC. “We remain somewhat negative still.”

In light of these developments, JPMorgan has been proactive, ramping up securitization to bolster its financial standing ahead of anticipated capital requirements.

Related: JPMorgan Ramps Up Securitization Ahead Of Anticipated Capital Requirements

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.