JPMorgan lowers its S&P 500 index forecast due to rising oil prices intensifying recession risks
JPMorgan has lowered its year-end target for the S&P 500 index from 7500 points to 7200 points, citing that the conflict in Iran has caused a surge in oil prices, which has intensified the risk of economic recession. The bank warned that the market may be underestimating the impact of rising energy costs on the economy.
While investors are focused on inflation, JPMorgan believes that the greater threat is to consumer demand, which could weaken economic growth. Historically, oil prices rising by more than 30% often lead to a contraction in demand and are frequently a precursor to economic recessions. In the short term, the S&P 500 index may decline further, especially after breaking below the 200-day moving average—this is a bearish signal. If the sell-off continues, the index may find support around 6000-6200 points.
Although JPMorgan still expects an economic recovery later this year supported by investments and stimulus measures, the extent of the recovery may be more limited due to ongoing geopolitical risks.
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