2024 might be ‘a catch-22 scenario’ for markets: JPMJPMorgan (JPM) is caution traders of a “catch-22 scenario” for US markets subsequent yr.Consistent with strategist Marko Kolanovic, a marketplace rally will likely be unsustainable if the Federal Reserve does now not lower rates of interest.”This can be a catch-22 scenario, by which threat belongings can’t have a sustainable rally at this stage of economic restriction, and there will be no decisive easing except dangerous belongings proper (or inflation declines because of, as an example, weaker call for, thus hurting company earnings),” Kolanovic wrote in a 2024 outlook document, printed on Friday.”This could suggest that we might wish to first see some marketplace declines and volatility right through 2024 earlier than easing of economic prerequisites and a extra sustainable rally,” he persevered.Kolanovic, who has been bearish at the rally up to now this yr, mentioned he prefers bonds and money to equities and different threat belongings, writing within the document, “In an excessively positive financial situation, we will see equities outperforming bonds (or money) by means of ~5%, whilst in a most probably setting of declining expansion or a recession, they might underperform money by means of ~20%.””Irrespective of whether or not a recession occurs or now not, ex-ante, the risk-reward in equities and different dangerous belongings is worse than in money or bonds.”Nonetheless, the inventory marketplace has persevered to outperform in 2023 with the S&P 500 (^GSPC) up 20% because the get started of the yr. The Dow Jones Business Reasonable (^DJI) and tech-heavy Nasdaq Composite (^IXIC) are up about 9% and 38%, respectively, over that very same period of time.Treasury yields, in the meantime, rallied to report highs previous q4 however have since retreated. The yield at the benchmark 10-year be aware (^TNX) is these days buying and selling close to 4.27% after surpassing 5% in October.
