Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor
Businessman looking down at a declining stock market; image from Shutterstock

Portfolio > Economy & Markets

Morgan Stanley's Wilson Sees Big Risks of a 'Major Correction'

By Ksenia Galouchko

X
Your article was successfully shared with the contacts you provided.

One of Wall Street’s most bearish strategists said U.S. equities are facing a wall of worry, which could fuel a sharp selloff in the near future.

Morgan Stanley’s Michael Wilson, whose outlook for a market slump in 2023 has yet to materialize, sees the S&P 500 at risk of a near-term drawdown.

He expects the benchmark index to end this year at 3,900 — about 10% below Friday’s close — before rising to 4,200 in the second quarter of next year.

“The headwinds significantly outweigh the tailwinds and we believe risks for a major correction have rarely been higher,” Wilson said in a client note on Monday.

Morgan Stanley is sticking with an outlook for earnings that’s below the market consensus, expecting S&P 500 EPS to be $185 this year compared with the average estimate of $220. Wilson said deteriorating pricing and top-line disappointment will drive the earnings misses.

In addition to profit risks, Wilson also reiterated the headwinds from deteriorating liquidity due to record levels of Treasury issuance and fading fiscal support. He expects value shares to outperform growth as investors turn to defensive sectors.

Deutsche Bank AG strategists including Parag Thatte said in a note on Friday that a modest selloff of 3% to 5% in the S&P 500 is now overdue, highlighting that it is more than three months since the last meaningful drop in March.

After rallying to the highest level since April 2022 earlier this month, the S&P 500 has been retreating amid concerns that the hawkish Federal Reserve will drive the economy into a contraction as it battles stubbornly high inflation.

Image: Shutterstock

Copyright 2023 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.