As stocks continue their rally, several major financial institutions are now predicting a significant downturn in global markets. The S & P 500 index has risen by more than 10% since its lows in October last year. In Europe, the STOXX 600 has increased by more than 15% over the same period. But, according to some investment banks, those gains are now at risk as they fear the lagged effects of monetary tightening are likely to hit earnings and cause compression in profit margins this year. In a note Tuesday , Jeremy Grantham — an investor with a history of calling bear markets, including last year's — said investors should brace for more losses in 2023 as "valuations are still nowhere near their long-term averages." He sees the S & P 500 ending the year at about 3,200, around 20% below current levels. .STOXX 1Y line On Wall Street, here are five of the biggest calls made so far: Bank of America: STOXX 600 down 20% by Q2 The Wall Street bank believes that the current strength in the stock market is not sustainable, and there could be a bear market by the second quarter of this year. We expect Euro area and U.S. growth to weaken to recessionary levels in response to harsh monetary tightening. Equities are far away from pricing this scenario, having been buoyed by the recent strength in the hard data due to companies working down their order backlogs. If growth weakens, in line with our projections, as the overshoot of hard data relative to new orders fades and underlying demand continues to weaken in response to monetary tightening, this would be consistent with around 20% downside for the Stoxx 600 to 365. - Jan. 20 GMO, S & P 500 down 20% to 3,200 by Dec. Chairman of GMO, Jeremy Grantham, who predicted a bear market last year, said shares prices are currently supported by the "positive influence" of the so-called presidential cycle. However, the notable investor expects the S & P 500 to fall to 3,200 "and spend at least some time below it this year or next." The pricking of the supreme overconfidence bubble is behind us, and stocks are now cheaper. But because of the sheer length of the list of important negatives, I believe continued economic and financial problems are likely. I believe they could easily turn out to be unexpectedly dire. I believe therefore that a continued market decline of at least substantial proportions, while not the near certainty it was a year ago, is much more likely than not. - Jan. 24 UBS: STOXX 600 down 8% to 410 by Dec. The Swiss bank also sees potential for an 8% decline to 410 (SXXP) due to declining earnings/margin expectations. We think the market significantly underprices downside risks. With yields and global growth risks expected to remain elevated for most of this year, we don't expect a material valuation rebound beyond what we have already seen this year. - Jan. 11 JP Morgan: STOXX 600 up 3% to 465 by Dec. The American investment bank has a more mixed outlook. JPMorgan strategists said the current market rally would likely start fading in the first quarter of 2021 as the catalysts that pushed stocks up since October — peaking bond yields, inflation, and the U.S. dollar — have all been factored into the market. JPMorgan believes the market will remain flat by the end of the year. We believe that the current market rally will start fading as we move through Q1. The stock market is behaving as if we were in an early cycle recovery phase, but the Fed has not even concluded hiking yet. While January still offers favourable seasonals, and the current investor positioning is far from heavy, both of which support stocks for the time being, we believe that one should be using potential gains over the next weeks in order to reduce exposure. - Jan. 23 Barclays: STOXX 600 up 6% to 475 by Dec. The U.K. headquartered investment bank Barclays is bullish on the European stock index. It expects the STOXX Europe 600 to end the year higher by 6% from current levels. It points toward data that shows hedge funds were reducing their net short positions in stocks, which removes downward pressure, to base its view. Short interest has halved from the Q4 highs for E.U. equities, but is still elevated in the U.S. Macro [hedge funds] have turned outright long equities, and their exposure is close to 12m highs, yet still below average. Long-short funds have also reduced short positions, but their net exposure remains low too. Buying of Europe equity ETFs by U.S. investors has also picked up, but overall positioning on the region remains far more cautious than positive consensus sentiment on the region suggests. - Jan. 25 — CNBC's Yun Li contributed to this report.