JPMorgan equity strategist warns of 8% pullback, suggests hedging CPI release
One Wall Street strategist is wary of the near-term market outlook, even as the consensus grows more optimistic. JPMorgan equity strategist Dubravko Lakos-Bujas is worried the S & P 500 could suffer a near term pullback of roughly 5% to 8%, equal to the benchmark index slumping as low as 6,200 or 6,000, respectively, and warned that August’s CPI, set for release Thursday morning, could be the catalyst for a correction. The broad market index closed Tuesday at an all-time high, above 6,500. Investors can protect themselves against downside risk by using an options strategy, Lakos-Bujas advised. “After one of the strongest rallies in decades, we would recommend near-term caution with the market pricing in aggressive rate cuts at a time when inflation prints are expected to ramp up, investor positioning is elevated, and Sept-Oct performance is seasonally weak,” Lakos-Bujas wrote on Wednesday, before the release of softer-than-expected August producer price data. “If inflation comes in hotter this week, we see the current goldilocks market positioning at risk of correcting,” the strategist added. .SPX YTD mountain S & P 500, year to date The near-term forecast that the S & P 500 could fall as low as 6,000 is also where Lakos-Bujas expects the S & P 500 will end 2025. The JPMorgan strategist has the lowest year-end forecast on the Street, according to a regularly updated CNBC survey . On average, strategists expect the benchmark will end the year at 6,498, roughly where the index is trading today. Lakos-Bujas’ bearish near-term call comes as others on Wall Street turn more optimistic on the market outlook, especially after Oracle ‘s latest revenue projections showed AI prospects that were even more stunning than analysts were predicting. Indeed, Wells Fargo, Deutsche Bank and Barclays all raised their S & P 500 targets on the back of a heightened AI trade, as well as diminishing effects from higher tariffs. To be sure, Lakos-Bujas himself also expects any near-term correction will quickly give way to further upside, aiming for a medium-term S & P 500 target of 7,000 sometime in early 2026. More immediately, the strategist worries that a “goldilocks” market that has thus far shrugged off concerns of economic weakness and bet instead on the Federal Reserve stepping in to ride to the rescue, could be in for a rude awakening — especially if the inflation data does not cooperate. Indeed, Lakos-Bujas wrote that JPMorgan’s economists are anticipating a pickup in inflation. “With six rate cuts currently priced in by the end of 2026, we believe risky assets may be vulnerable at a time when tariff-induced inflation is starting to flare-up, possibly restraining the Fed’s forward easing path — the next risk event is the upcoming August CPI release,” Lakos-Bujas wrote. — CNBC’s Alex Harring contributed to this report.
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