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JPMorgan analysts have reiterated that the S&P 500 is overvalued, and a significant decline is imminent.
The U.S. benchmark index might experience a correction due to macro and earnings uncertainties, according to JPM strategists.
“We have viewed the 4100-4200 as a key resistance zone and an area we did not expect the market to penetrate in a lasting or meaningful way in the first half of 2023,” the JPMorgan analysts said in a letter to clients.
The index may hit “key levels near 3500 by early summer” before reaching the mid-term support area of 3760.
“We think it will ultimately mark the bottom of the cycle, particularly if the bad performance is accompanied by impulsive yield curve steepening. We suggest maintaining a bearish bias and staying defensively positioned until that setup emerges,” the analysts added.
On the upside, highlighted resistance levels are 4115, 4200, and 4239.
“We would need to see a sustained break above 4200 and a clear rotation to cyclical leadership in the US and across global markets to make us rethink our 1H23 outlook. Not only has the market acknowledged our preferred resistance and generated systematic sell signals to support our stance, but the rotation away from the cyclical and recent decline in markets like copper and semiconductor share prices give us even more confidence in the outlook,” the analysts said.
S&P 500 is up 5.65% year-to-date.
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