JPMorgan Chase & Co. (NYSE:JPM) has raised the red flag over the impact of elevated levels of volatility in the stock market going forward. The investment bank has since slashed its forecast for US stocks by 9.1%. According to analysts at the bank, US stock could experience two years of flat earnings per share growth, on market volatility damaging the broader economy.
JPMorgan Estimates
Head of equity strategy at the firm Dubravko Lakos-Bujas believes the current market volatility could sink the Standard & Poor 500 index to below the 2,000 mark in the year. His forecast is the most bearish in the industry as the index closed 2015 at highs of 2,200 mark. JPMorgan Chase & Co. (NYSE:JPM) forecast trails that of 18 other Wall Street peers. The bank now expects stocks in the S&P to generate a total of $120 a share for the year down from an initial estimate of $123 a share.
In a research note to investors, Lakos-Bujas notes that elevated volatility could cause significant damage on market psychology. Business and consumer sentiment could as a result be negatively impacted causing many investors to shun the stock market. JPMorgan Chase & Co. (NYSE:JPM) sentiments come even as Procter and Gamble data for January indicated that consumer confidence is slowly improving.
Short Term Support
JPMorgan expects equities to enjoy some form of support in the short term as a result of positive fourth quarter earnings and pick up in buyback activity. However, a lack of a positive catalyst from the central bank could push equities even lower in the long run.
US stocks could register their worst start of the year since 2010 if things don’t pick up in the next few days. Concerns over the state of China’s economy and a slump in oil prices all but continue to spur levels of volatility never seen in years. Diverging economic policies between Europe and the US also continues to affect sentiments in the stock markets.
JPMorgan Chase & Co. (NYSE:JPM) is the fourth firm to slash its expectations for the stocks market. Deutsche Bank AG (USA) (NYSE:DB), Citigroup Inc (NYSE:C) and RBC group have all raised concerns over the levels of volatility in the equities market. Bank of Montreal held the lowest call of 2,100 prior to JPMorgan a more bearish tone.
Anthony Young
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