S&P 500 Outlook: What Are J.P. Morgan’s Views?

J.P. Morgan’s chief equity strategist, Dubravko Lakos-Buja, expects an upside of 8% in the S&P 500 Index (SPY). On Monday, a CNBC report mentioned the strategist’s statement. He said, “The business cycle should begin to gain stronger traction by early 2020.”

Global growth story

The IMF expects the global economy to rise 3% this year. In 2020, the global economy could grow by 3.4%. However, the expansion might be hampered if the US-China trade talks fail. Although the trade talks have been progressing, the differences are rising. Read S&P 500: Could December Outlook Be Like 2018? to learn more.

S&P 500 at 3,400

The strategist said that the S&P 500 Index could reach 3,400 next year. At this level, SPY would be 8.4% higher than Monday’s closing. Wall Street strategists have a target of 3,272 for the S&P 500 Index.

Other famous strategists like Morgan Stanley’s Mike Wilson and UBS’s Francois Trahan expect equities to decline due to earnings contractions. To learn more, read Mike Wilson: Don’t Expect a Breakout in the S&P 500.

Fund manager’s views on US equity

On Monday, in an interview with MarketWatch, famous hedge fund manager Kyle Bass said, “Where are you going to put your money? In Europe, in China, in South America? There is no better place to put your money than the United States.” Earlier, we discussed that most of the strategists expect the rise in US equities to continue into 2020.

Growth factors

The Federal Reserve Bank of Atlanta expects the US fourth-quarter GDP annualized growth rate to be at 2%. In the fourth quarter of 2018, the GDP rose 2.9%. The GDP growth in the first three quarters of 2019 was lower than the GDP growth in 2018.

Experts think that President Trump’s fiscal stimulus is having less of an impact on the economy. Another round of stimulus could help the expansion rate to grow more, based on expert views. To learn more, read Bill Gross: Top Stock Picks with High Dividend Yields.

Democrats in the House of Representatives could vote in favor of the USMCA (United States–Mexico–Canada Agreement) bill. However, Republicans hold the majority in the Senate. A CNBC report said that Democrats might agree to the legislation after several rounds of negotiation.

President Trump and Vice President Mike Pence said that the bill is important. The bill would strengthen the employment situation. White House officials said that the bill could help US equities see a new record high. To learn more, read Dow Jones Jumps on Tariffs: Investors Eye 30,000.

In November, unemployment fell to the lowest level since 1969. If the bill passes, we might see a new record low for unemployment data. To learn more about the employment situation, read Employment Data: Trump’s Reelection Chances Grow.

Political risk and S&P 500

The US presidential election is next year. Things might change if Democrats win the White House. Instead of another round of fiscal stimulus, we might see legislation related to the wealth tax. The legislation might halt any upside in the S&P 500. Some Democratic presidential candidates support the wealth tax.

President Trump’s ongoing impeachment inquiry might be a problem for the S&P 500. If the charges are upheld, President Trump won’t be part of the next presidential election. Read Trump Impeachment: ‘The Democrats Should Apologize’ to learn more.