The bulls are starting to feel the pressure.
JPMorgan, which has always been a cautious optimist, is showing signs of wavering. The bank recently parted ways with Marko Kolanovic after his bearish outlook failed to materialize. Its new team, led by Dubravko Lakos-Bujas, isn’t exactly bullish by Wall Street standards, projecting the S&P 500 to close the year at 6,500 — a middle-of-the-road target compared to peers.
That target remains possible but ambitious, requiring a 13% rally from current levels. Thursday’s 1.8% drop left the S&P 500 at 5,738.52, adding to market jitters.
“We maintain our year-end price target of 6,500 but acknowledge a wide margin of error, with the possibility that the index may not reach this level until 2026,” said the JPMorgan strategists. For now, they expect the S&P 500 to trade between 5,200 and 6,000 before gaining momentum later in the year.
Despite the volatility, the team sees little risk of recession. They argue that markets are adjusting to policy-driven growth concerns, with falling interest rates, oil prices, and a weaker U.S. dollar providing support for risk assets. Lower borrowing costs could unlock pent-up demand in sectors like housing, retail, and autos.
The 10-year Treasury yield is down nearly 30 basis points this year, oil prices have fallen 7%, and the U.S. dollar index is down 4% in 2025. Markets are pricing in nearly three Federal Reserve rate cuts this year, with the potential for more if the economic outlook deteriorates.
Policy easing would align with the Treasury secretary’s goal of lowering rates, spurring growth without reigniting inflation, and reducing the budget deficit. A potential Russia-Ukraine peace deal and softer commodity prices could also help cool inflation further.
Strong corporate earnings and a resilient labor market provide another layer of stability. Credit markets remain robust — a key signal that the economic cycle isn’t rolling over.
Capital spending in the U.S., defense investments in Europe, easing measures in China, and pro-growth reforms in Japan could further bolster earnings. Meanwhile, the AI boom continues to accelerate, particularly in the U.S. and China, driving productivity gains that are underappreciated by many analysts.
JPMorgan advises investors to hold a barbell portfolio: bond proxies like utilities and consumer staples on one side, and rate-sensitive stocks like regional banks and real estate on the other. The team downgraded large-cap banks to neutral from overweight, while upgrading consumer discretionary stocks to neutral from short.
Outside the U.S., they see significant upside in Chinese tech and internet stocks as well.
