According to a recent note from JP Morgan, although the general outlook for the stock market in 2024 appears gloomy, investing in small caps could prove to be advantageous this year.
Despite the anticipation of most global indices reaching new heights this year, JP Morgan’s equity strategists have issued a warning that the upward trajectory of the stock market may be temporary, and there is a possibility of a substantial decline in the markets during this year.
JP Morgan analysts have recently published a note indicating that the stock market may experience a decline of approximately 20 to 30 percent following a notable peak in 2024. Additionally, these strategists have cautioned investors about the potential for substantial volatility and elevated risks throughout the current year.
According to a note from JP Morgan strategists, it is reiterated that the potential for gains is restricted and equities are expected to decline by 20-30% from their peak in 2024, as reported by Investing.com. Despite the gloomy overall outlook for the stock market in 2024, the note suggests that investing in small caps could be advantageous this year. The strategists outline various factors contributing to market volatility in 2024, such as an economic recession and an inverted yield curve. Additionally, the note highlights the risk of large caps reaching inflated values.
The analysts have raised concerns about another significant risk, which is the historically low yield spreads despite the central banks’ substantial increase in interest rates this year. According to the note, the current state of corporate balance sheets is weaker than it was prior to the 2008 recession.
JP Morgan strategists, drawing from their 25-year career, have observed instances of irrational behavior in equity markets. They emphasize the importance of exercising caution during such times, as the fundamental principle of 2 + 2 always resulting in 4 holds true.
The cautionary tone adopted by JP Morgan strategists serves as a prediction of potential global stock market decline in the upcoming months. They advise investors to make more informed and calculated decisions when purchasing stocks.
ICICI Direct has recently forecasted that the Indian stock market may experience a substantial surge in the upcoming months, particularly as 2024 approaches, which is an election year. According to their prediction, the NSE Nifty index could potentially reach a remarkable 23,400 points by June 2024.
Over the last thirty years, election years have witnessed a median market return of 17 percent. ICICI Direct has encouraged investors to take advantage of the market decline in February-March, as the 2024 Lok Sabha elections are predicted to cause a substantial surge in the markets.
Additionally, ICICI Direct has stated that the outperformance of PSU Bank stocks is anticipated to increase in the coming months. Despite the current market dip, investors should also monitor IT stocks.