Barely two months after JPMorgan’s Marko Kolanovic previewed the next financial crisis, which he dubbed the “Great Liquidity Crisis”, and which would be catalyzed by the following liquidity disrupting elements:

… the quant wizard is back in a more conventional form, this time summarizing JPM’s 2018 outlook for equities, volatility and tail risk.

Starting at the top, it may seem otherwise paradoxical – although in the new normal nothing surprises any more – that JPM which holds a near previewed the next financial crisisis also the bank with the highest 2018 S&P target among its bank peers. Here’s Kolanovic:

Our price target for S&P 500 at the end of 2018 is 3,000 and our earnings forecast (including tax reform) is $153. Half of the earnings upside (~$10) is due to tax reform, and the other half due to top line growth (~$7), margin expansion (~$1.50) and buybacks (~$2.50). To reach the price target, bond yields should not rise too much as that would destabilize the equity multiple. Yesterday’s Fed announcement did not indicate an increased pace of tightening. Opinions differ on the number of hikes in 2018, level of long term rates and impact of G4 central bank normalization. We think that risks for equities will start rising significantly mid-next year as the monetary accommodation is reduced and the level of interest rates increases. This will also be the main driver of an uptick in market volatility in our view.

In other words, the second half is when one can expect fireworks. Meanwhile, and speaking of tax reform, the immediate future will – after numerous false starts – be marked by a “great rotation” into the Trump Tax Trade…