The latest market intelligence report from JPMorgan highlights several reasons why the stock market might experience near-term downside risks. While the current rally has been impressive, there are some historical patterns and factors that could indicate a potential slowdown or reversal in the near future.

Firstly, the report notes that in years when the S&P 500 was up 5-25% through August, September and October have historically delivered small returns, with an average return of just 1.7% during these months. Furthermore, the report finds that this year’s rally is stronger than every other year aside from 2020’s rebound, which could indicate a potential slowdown in the near future.

Secondly, the report highlights the length of time without a modest pullback as another risk factor. Currently, it has been 93 days since the last 3% decline, tying the rebounds from 4Q16 and 4Q23 lows as the longest without a 3% pullback. This could suggest that investors may be due for a correction, especially if retail sentiment remains bullish and near 1-year highs.

Thirdly, the report notes that major macro events are behind us, which could mean that there is less room for more easing to be priced into markets in the near term. This could make it more challenging for the market to continue its upswing without a significant correction.

Overall, while the current rally has been impressive, investors should be aware of these potential downside risks and remain cautious in their investment strategies. It is important to stay informed and adapt to changing market conditions to ensure long-term success.