The last bear on Wall Street: Why JPMorgan's Marko Kolanovic is sticking by his forecast for a 20% market sell-off

• JPMorgan's Marko Kolanovic sees no reason to turn bullish on the stock market despite record highs.
• In a Monday note, Kolanovic reiterated his view that the S&P 500 could fall 20% to 4,200.

Just one day after Morgan Stanley CIO Mike Wilson abandoned his bearish stock market call, JPMorgan's Marko Kolanovic is digging his heels in.

Kolanovic is the last mega-bank-bear on Wall Street, reiterating his view in a Monday note that the S&P 500 will fall about 20% to 4,200, levels not seen since October.

"With very high equity valuations, we do not see equities as attractive investments at the moment and we don't see a reason to change our stance," Kolanovic said.

US stocks have notched record highs over the past week, with the S&P 500 trading just above 5,300 for a year-to-date gain of more than 11%.

Kolanovic acknowledged that his bearish view on stocks has hurt the performance on his multi-asset portfolio over the past year, but with interest rates likely to stay in restrictive territory for longer, combined with lower-income consumers showing signs of weakness and high levels of geopolitical uncertainty, now is not the time to turn bullish according to Kolanovic.

And AI won't save the stock market, either.

"We don't think that narrow themes like AI chips can compensate for all of those traditional market challenges that historically worked against the cycle," Kolanovic said.

In the case of Morgan Stanley CIO Mike Wilson, it was ongoing strength in corporate earnings and the likelihood that earnings growth will accelerate in 2025 due to operating leverage that sparked his view change from bearish to bullish.

But Kolanovic doesn't necessarily see it that way, saying in his Monday note that for 2024 S&P 500 earnings to meet investor expectations, third- and fourth-quarter EPS growth will need to accelerate 16% compared to the first-quarter.

"That is unlikely, especially if the recent spell of softer activity dataflow continues," Kolanovic said.

It's been a tough stretch for Kolanovic and his forecasts over the past few years.

The closely-followed Wall Street strategist was bullish on stocks for much of the 2022 bear decline, only to flip bearish right around the bottom made in mid-October 2022. From there, Kolanovic has remained consistently bearish on stocks throughout 2023 and 2024, when a rally of more than 40% materialized for the S&P 500.