JPMorgan analysts have warned that the S&P 500 is currently overvalued and at risk of a major pullback. Despite the US benchmark index recently reaching record highs, JPMorgan strategists believe that the 4100-4200 range is a crucial resistance zone that the market is unlikely to sustain in the first half of 2023.
The analysts suggested that if the mid-term support at around 3760 does not hold, the S&P 500 may test key levels near 3500 by early summer. They also advised investors to maintain a bearish bias and defensively position themselves until a cycle bottom is set.
Although JPMorgan has highlighted resistance levels at 4115, 4200, and 4239, a sustained break above 4200 and a clear rotation to cyclical leadership would be needed to make them rethink their outlook for 1H23.
JPMorgan's repeated warnings about the S&P 500's overvaluation and macro and earnings risks should not be taken lightly. As of now, the S&P 500 is up 5.65% year-to-date, but investors should be cautious as the market may experience a significant correction soon.
In summary, JPMorgan predicts that the S&P 500 may drop to 3500 by early summer and advises investors to maintain a bearish bias until a cycle bottom is set.
