See economic slowdown globally in H2 2024, markets have priced in rate cuts: JP Morgan's Sullivan

The market rally is expected to continue till the year-end, the top JP Morgan official said.

A global economic slowdown is being anticipated in the second half of 2024, that will affect the markets in Asia, said James Sullivan, Head of Asia Pacific Equity Research at JP Morgan, while speaking to CNBC TV-18 on December 7.

The markets have taken into consideration a likely reduction in lending rates by the US Federal Reserve — which is expected to trigger cuts by other central banks as well — Sullivan suggested but added that JP Morgan differs over the timings of the likely slashing of rates.

"In terms of the potential for rate cuts, the markets priced in 100 basis points of rate cuts in the first half of 2024. JP Morgan's house view is that it is much more likely to be in the second half, biased with the potential to push into the following year," he said.

Also Read: Daily Voice | This market veteran expects rate cuts at the end of FY24, RBI to raise full year GDP growth forecast

Commenting on the recent rally in the US and other markets, Sullivan said JP Morgan's view is that "the rally will continue through year-end".

"The difficulty that presents from a 2024 perspective, though, is that you set expectations and the overall bar very high walking into next year," the analyst, however, pointed out.

Sullivan said there is a potential for solid market performance in the first half of 2024, "particularly off the back of idiosyncratic election timing in the first half of the year in many of our Asian markets".

Notably, the general elections in India are expected to be held between March and May. The victory of the Centre-ruling Bharatiya Janata Party (BJP) in recent Assembly polls has led to a market rally, with analysts viewing the cheer as the market's nod to political stability.

In the trading session on December 4, the day following the results, Sensex soared to an all-time high of 68,865.12 on Monday, whereas, the Nifty settled at a record-high of 20,686.80.

According to Sullivan, an economic slowdown will affect the markets in Asia in the second half of 2024. "The challenges we get into the second half is we do see an economic slowdown globally. We do see downside to earnings here in Asia for MSCI Asia Pacific," he said, while noting that JP Morgan does not see a massive downside "but a negative earnings revision cycle".