The S&P 500 (^GSPC) has spiraled in recent days with the benchmark index shedding about 3% since the Federal Reserve warned investors that interest rates are likely to remain higher for longer than initially anticipated.

With the S&P 500 hovering just above JPMorgan's year-end target of 4,200, the firm's chief market strategist doesn't see the case for a recovery.

"Medium term we remain negative and find the risk-reward in equities and credit spreads unattractive relative to a fixed income alternative (cash)," Marko Kolanovic wrote in a note to clients on Wednesday. "This will likely remain the case as long as interest rates remain in deeply restrictive territory and the overhang of geopolitical risks persists."

Kolanovic highlights a list of challenges that have weighed on investor sentiment in recent trading sessions. Oil prices just hit 2023 highs. The Federal Reserve's interest rate projections show rates will be higher for longer than initially anticipated. China's economy hasn't rebounded out of the pandemic as expected. And the seemingly resilient American consumer might be running out of cash.

The combination of those headwinds has created an environment that "rhymes with 2008," per Kolanovic.

"While we are not saying that the situation now is the same as in 2007-2008, there are enough similarities to warrant caution," Kolanovic wrote. "Differences are in terms of exposure of economic segments to the interest rate rise, leverage of different market segments, size of rates increase, impact that comes at a different (likely longer) time lag, as well as geopolitical and energy considerations. But signs of stress are beginning to appear."

JPMorgan argued the "core risk" for markets and the economy remains interest rate shock. The lagging effects of monetary policy have taken longer to bleed through due to the unique positioning of the economy prior to the Fed's first interest rate hike, according to JPMorgan. A record amount of stimulus was put into the economy, flushing consumers with cash. Borrowing costs were also historically low at the onset of the pandemic allowing homeowners to refinance and avoid the pain of 7% mortgages. Corporates also enjoyed low interest on loans.

Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards

But eventually, Kolanovic points out, those loans will expire and the interest rates won't be as low when companies come back to the bargaining table.

"There are clearly differences from 2008, when a significantly higher % of mortgages had to be refinanced and leverage in the subprime sector was much higher," Kolanovic wrote. "However, the impact on consumers is negative, and there is nothing to reverse this trend unless interest rates are cut."

A chart from JPMorgan shows credit card delinquencies, auto loans, and Chapter 11 bankruptcy filings have reached levels not seen since the Great Financial Crisis.

The first sign of tightening monetary policy shocking the economy came with the regional banking crisis. As markets searched for direction, upbeat prospects around artificial intelligence helped boost stocks higher over a several-month period than most Wall Street strategists thought would happen in all of 2023.

That won't work this time, Kolanovic says.

"AI could boost the stock market in a speculative fashion like it did earlier this summer," he wrote. "Some of the wealth effect from high stock market valuations could also pass into the economy via broad consumer sentiment, which might have introduced additional lags, but that could equally quickly disappear."

Josh Schafer is a reporter for Yahoo Finance.

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