Hoping for a Santa rally? Not so fast

Those hoping for a seasonal "Santa rally" in stock markets this year could be disappointed, according to Nomura strategist Bob Janjuah, who warned that the S&P 500 could slump to its October lows in the near term.

The widely-watched analyst, who is known for his bearish views, also said in a research note published Wednesday that he saw little upside for the equities in the coming year.

Janjuah said 2015 looked set to be even more turbulent than 2014 and warned that equities would make for an "unattractive" investment.

The key issues ahead are weakness in growth weakness and a fall in consumer prices, according to Janjuah, who referred to the "victory of deflation" and the "Japanification of the world."

"I continue to believe that four very strong deflationary factors are driving things – global indebtedness levels, demographics, technology and globalization," he said.

The S&P 500 was at 2,012.89 points on Thursday morning, and looked likely to rally after dovish words by Federal Reserve Chair Janet Yellen.

But Janjuah told CNBC on Thursday that any rise would just be an "interim bounce."

He argued that if the S&P has a weekly close below 1,905 points in the next few weeks, October's low of around 1,820 points would be the next target. This would see the yield on the U.S. 10-year Treasury falling to 1.75 percent, the dollar index easing back and generally weaker global equity markets, Janjuah added.

Janjuah's "stop-loss" – when investors should stop trading to limit potential losses - would be a weekly close above 2,020 points on the S&P.

"If I am stopped out...so be it – stop-loss rules are non-negotiable. But my caution and concerns remain," he said.

Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Trader on the floor of the New York Stock Exchange.

His bearish outlook contrasts with many calls from analysts at other investment banks.

JPMorgan has a base-case outlook for the S&P to top 2,100 points in the first quarter of 2015, but then sees a period of consolidation. Bank of America Merrill Lynch predicts a level of 2,200 points by end of the 2015.

Meanwhile, the Credit Suisse believes that it could hit that level by the middle of the year and then give up most of its gains. Goldman Sachs has stated a target of 2,100 by year-end, but strategist David Kostin has implied that it could even stretch to 2,300 if the Federal Reserve holds back on any interest rate hikes.

Janjuah is no stranger to gloomy predictions and has made several bold calls in recent years.

In November 2013, he said the end of 2013 until the end of the first quarter of 2014 would be a buying window, followed by a 25-50 percent sell-off over the last three quarters of 2014. Since April, the S&P has risen by 7.4 percent.

On October 15, he said that if the S&P 500 failed to close above 1,905 points the following Friday, then it would drop to 1,770 points with the possibility of a "major correction" to 1,570 points by late November. The index closed at 1,886 points that Friday, and has since risen 6.7 percent.