JPMorgan's Kolanovic maintaining S&P target of 4,200 on sell offs
In This Article:
As the S&P 500 (^GSPC) is blindsided by a sell-off this week, JPMorgan analyst Marko Kolanovic — known as "Dr. Market" — is one of the bears standing firm at his 4,200 point target. Yahoo Finance Reporter Josh Schafer breaks down Kolanovic's market call and how JPMorgan is accounting for credit card and loan delinquencies amid higher interest rates held by the Fed.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
This post was written by Luke Carberry Mogan.
Video Transcript
BRAD SMITH: Well, the S&P 500 has spiraled in recent days with the benchmark index shedding about 3% since the Federal Reserve warned of its higher for longer stance.
But the sell off isn't necessarily a buying opportunity according to some on Wall Street.
Yahoo Finance's Josh Schafer is here with that story.
Hey, Josh.
What are the bears saying out there?
JOSH SCHAFER: Yeah, Brad, so we've been taking a pulse of the bears and the bulls here, right, and seeing who's maybe finding a buying opportunity in this dip that we've seen and who is not.
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So JP Morgan's Marko Kolanovic has had a 4,200 target call on the S&P 500 for some time now.
He's not moving off that call and, if anything, probably sees a move to the downside over a move to the upside.
That's largely for some obvious reasons.
We've seen when you take a look at that 10-year, that's up about 50 basis points over the last month.
And then you look at oil coming up nearly 15% over the last month as well.
We know those are key obvious headwinds.
But then he also highlights an interesting thing here overall.
He says that the core risk for markets in the economy remains interest rate shocks.
And Kolanovic sort of gets into a comparison to 2008, how interest rate shocks worked then in 2008 and-- 2007 and 2008, and says, of course this time is different.
We're not necessarily talking about subprime mortgages.
But he said that it rhymes with 2008, and he takes a look at consumer delinquencies that we're seeing on certain loans.
So if we take a look at that chart from JP Morgan, you can see consumer delinquencies on consumer loans picking up significantly.
You're seeing there there are loan delinquencies for credit cards, delinquencies for auto loans.
Look at bankruptcies-- up significantly, all rising as that Fed funds rate comes up.
And so when we're talking about that lagging impact that Kolanovic sees, you had a lot of companies that borrowed at pretty cheap prices, pretty cheap loans, right?
Not a lot of interest on those loans.
Of course, as they come back to market over the last year, in the next year, they're going to have to pay a lot more to borrow money.