Wall Street’s Bears Warn on Risks to Stocks From Slowing Economy

The US stock plunge is vindicating some of Wall Street’s most prominent bears, who are doubling down with warnings about risks from an economic slowdown.

JPMorgan Chase & Co.’s Mislav Matejka — whose team is among the last-standing high-profile pessimistic voices this year — said stocks are set to stay under pressure from weaker business activity, a drop in bond yields and a deteriorating earnings outlook. Morgan Stanley’s Michael Wilson warned of “unfavorable” risk-reward.

“This doesn’t look like a ‘recovery’ backdrop that was hoped for,” Matejka wrote. “We stay cautious on equities, expecting the phase of ‘bad is bad’ to arrive,” he added.

US equities have slumped in the early days of August, driven by tech, as investors worry the Federal Reserve has been too slow to cut interest rates in time to prevent a recession. Figures last week showed a slump in US manufacturing and a bigger-than-expected slowdown in hiring.

Stocks had previously rallied on weaker data on hopes of a Fed rate cut and a soft economic landing.

At 4,200 points, the JPMorgan team holds the lowest year-end target for the S&P 500 among strategists tracked by Bloomberg. The forecast implies declines of another 21% from the index’s Friday close.

Another notable bear on US stocks until last year was Morgan Stanley’s Wilson. The strategist has shied away this year from making big calls on the S&P 500 after his pessimistic view didn’t play out in 2023, and has turned outright bullish on the index for mid-2025.

But in a note on Monday, Wilson said economic data last week “challenged the soft-landing view” held by some market participants.