Short-Term Drop in the Index

JPMorgan strategist Dubravko Lakos-Bujas warned that the S&P 500 could decline between 5% and 8% in the short term. This would take the index to levels of 6,200 or even 6,000 points. The market recently closed at an all-time high above 6,500.

The specialist noted that the August inflation data, which will be released this Thursday, could trigger the correction. As a protective measure, he recommended using options strategies.

Inflation in Focus

"After one of the strongest rallies in decades, we advise caution in the short term," wrote Lakos-Bujas. He explained that the market is pricing in aggressive rate cuts while a rebound in inflation is expected. He also noted that September and October are typically weak months for the stock market.

The strategist insisted that if inflation exceeds expectations, current market confidence could crumble: "If inflation is higher this week, we see the Goldilocks market position at risk."

2025 Forecasts

Lakos-Bujas projects the S&P 500 will end 2025 at 6,000 points, Wall Street's lowest estimate. In comparison, the consensus of strategists surveyed by CNBC expects a close around 6,498, virtually the index's current level.

Optimism at Other Firms

While JPMorgan warns of risks, other banks are showing confidence. Oracle presented revenue projections powered by artificial intelligence that exceeded expectations. This led Wells Fargo, Deutsche Bank, and Barclays to raise their targets for the S&P 500, supported by the rise of AI and the easing pressure from tariffs.

Medium-Term Target

Although she foresees a short-term decline, Lakos-Bujas expects the setback to be temporary. His medium-term goal is for the S&P 500 to reach 7,000 points by early 2026.

The analyst warned that the market has placed too much faith in eventual support from the Federal Reserve. However, if consumer prices rise more than expected, that expectation could be dashed.

The Fed's Role

According to Lakos-Bujas, JPMorgan economists anticipate a surge in inflation. He noted that six rate cuts are already factored in through 2026, but that the rise in prices caused by tariffs could limit the Fed's ability to ease its policy. "The next risk event is the August CPI release," he concluded.