Will the US stock market experience a "crash"? JPMorgan: Accelerated decline in the fourth quarter!

Entering the fourth quarter, investors are facing increasing risks, which will only grow larger - from rising interest rates to the possibility of inflation making a comeback, to the stalemate in Washington, all of these could become obstacles to economic growth.

Limited Upside for US Stocks

The Federal Reserve is still in a tightening mode, and the magnitude of rate cuts next year is unlikely to be as large as previously expected.

As the United Auto Workers (UAW) union expands its strike, oil prices are expected to reach $100 per barrel, once again raising concerns about inflation.

At the same time, mitigating factors that could slow down economic growth - such as the possibility of a government shutdown and the resumption of student loan repayments - may not be enough to shake the Federal Reserve's determination to combat inflation.

US interest rates may continue to rise until December, and US bond yields have reached levels not seen in at least 12 years, setting a limit on further gains in US stocks and prompting investors to seek safe havens.

Bearish Outlook for US Stocks?

The Federal Reserve announced its latest policy on Wednesday, emphasizing that interest rates will remain elevated for a longer period of time.

A day later, JPMorgan strategists Jay Barry, Jason Hunter, and other analysts stated that their bearish view on US stocks "has become compelling," and from a cyclical perspective, September to mid-October "happens to be the most bearish period in the high-risk market throughout the year."

They stated that, compared to the year of the 1987 "Black Monday" crash, they expect the decline in US stocks to accelerate in the fourth quarter, but they did not predict a "crash."

In the words of Christian Hoffmann, portfolio manager at Thornburg Investment Management, the Federal Reserve has created an environment where there are "more losers than winners," with both the stock market and bond market recently experiencing declines.

The Next Earnings Season is Crucial

However, some analysts remain optimistic. "If the Federal Reserve continues to raise interest rates because of strong economic growth, then a longer period of rate hikes may not necessarily be a bad thing," said Jeffrey Cleveland, Chief Economist at Payden & Rygel. "Economic growth is stronger than expected, and that's why rates are adjusting. It may not be a bad thing for the riskier parts of our portfolio."

Gregory Daco, Chief Economist at EY-Parthenon, said that currently, the US seems to be experiencing a "soft landing," with a healthy labor market but cooling down, wage growth slowing down, and both consumers and businesses spending cautiously.

Michael Landsberg, of Landsberg Bennett Private Wealth Management, said, "There is a lot of uncertainty in the upcoming earnings season starting in mid-October," and "we need significant earnings growth to see any significant upward movement in the market."