These are the biggest market risks in the second half of 2024

JPMorgan Private Bank released its mid-year outlook for 2024, "A Strong Economy in a Fragile World." The report forecasts how the global economy will play out this year

Yahoo Finance reporter Josh Schafer joins Market Domination Overtime to break down the report and what investors should keep in mind for potential global economic outcomes for the rest of 2024.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Nicholas Jacobino

Video transcript

Jp Morgan releasing its new 2024 mid year outlook today here to help break it all down as young finances, Josh Shafer, I've alluded to this a couple of times because it was Marco Kalan.

Um one of the few bears who remains on Wall Street, Marco holds a 4200 call on the S and P 500 which would be an over 20% fall from where we are now.

They haven't moved their target, which I think is notable.

And a lot of times I think you do see this grey where you have a very low target.

I don't think he's that tempted to chase exactly where the market's gonna fall.

So like 4200 to me is a little bit arbitrary when it comes to that.

But essentially J PM saying here similar things they've been saying since the start of the year, which is you have frothy sentiment, you have valuations that are high, they don't feel great about that sort of dynamic in the market right now.

And so I kind of took that note and then I broaden it out to what other strategists are saying to.

And kind of created three risks that people are watching heading into the second half of the year because we kind of went up in more or less a straight line to start the year.

And one thing that a lot of folks are talking about right now is the labor market.

And I think that's gonna be a continued focus going into the second half of the year.

And specifically, if we see any kind of a downturn and that goes with labor market downturn would equal economic weakness.

City economics team still has a recession call.

Scott Kroner mentioned that in his note today, he's their strategist.

But he said, well, if my team is still sitting on a recession call, maybe we do get a pull back in stocks.

Their call is 5600 in the S and P. But at some point, maybe that there's a little bit of a push pull there when it comes to the labor market.

And then as far as sentiment goes, city uses this thing called the Levkovich index to look at whether we're in a period of euphoria or a period of panic when it comes to sort of stock market.

Um different aspects of the market you can see here, we just barely got into euphoria over the last couple of months.

And so you could call sentiment frothy, but kind of one of the other takeaways from this chart is you can see how long sentiment can be frothy.

If you look at the two thousands period there, we were well above that light blue line for a long time.

We were above.

It's still in the, it's still in the bounds.

It looks like in that chart, it's a little bit above it if we really zoomed in.

But yes, it's not out of control.

And, and by the way that, that index named for late strategist Tobias Lekovic, who was a wonderful person to talk to about the markets.

Um And it's great that they have that index that is named for him.

A final thing, Jeff, we were talking about Pullbacks and I think it's just important to understand that we haven't had a real pullback yet.

This year, we had a 5% pull back in April.

But when you look long term, the average is closer to about 14% over the last 40 years for the S and P 500 Keith Lerner over at Truist highlighted this a while back and we've sort of just been updating that chart.

And I think the takeaway here being, you almost should expect more of a pull back at some point.

It wouldn't be abnormal at all the way the stock market went up actually, for the first six months this year is probably more abnormal.

And so as you think about things you guys have been talking about today with the election and potential volatility maybe coming into the market.

Remember the VX is near historic lows.

Our Jerry bookery talks about it most days and it hasn't moved all that much.

So if that starts to play in a little bit more, maybe that's when you finally see stocks stop going up seemingly every day.

Yeah.

You know what I like about this.

Not too, they talked about the election and the debate and obviously they published before the debate and they, and they told their clients, you know, that it could really clarify, talking about the debate, the key policy platform for the candidates.

I don't know, I don't know, policy, it clarified something, I guess, I don't know, I don't know.

Policy.

Maybe they'll revisit that one.

Joshua.

Thank you.

Appreciate that.