The Morgan Stanley strategist who called the bear market sees a new low in the fourth quarter
The stock market has suffered recently, and there may be more pain ahead for stock investors, according to Morgan Stanley. Mike Wilson, the bank’s chief investment officer and chief US equity strategist, said he expects the S&P 500 to bottom around 3,400 in the fourth quarter. That’s more than 13% lower than Friday’s close and well below the mid-June low of 3,666. “If there is a recession, the benchmark could drop to 3000,” Wilson said. “From there, we believe prices will recover to our base (3900) or carry (3350) our June 2023 targets,” he added. “In the very near term, if eventual interest rates fall, stocks may hold or even rise until later this month when Qt is likely to increase and earnings estimates are likely to decline.” The strategist cited the persistent and “increasingly significant” downside to earnings growth through 2023 for his advocacy. “The next several quarters will end up containing some of the most significant downward revisions to future EPS forecasts we’ve seen in the past several cycles,” Wilson said. Wilson’s call comes as investors look to retest the June lows. The market is exiting its third consecutive low week. Moreover, September has historically been a bad month for the market. “While the June lows for stocks and bonds were dramatic, we’ve always been in the camp that it wasn’t the S&P500 low in this bear market,” said Mike Wilson, chief investment officer and chief strategist for US equities. In a note Monday. About a year ago, Wilson called for stocks to fall 20% as economic indicators began to deteriorate. On Monday, he said that while the first half of 2022 was driven by both “fires” (the Fed’s tightening in response to historically high inflation) and “ice” (disappointing growth), the second half “will turn even more icy.” …and not fiery because slowing growth becomes the biggest concern for stocks, not inflation and the Federal Reserve.” On Tuesday, the S&P 500 index briefly fell below 3,900 one point. Some on Wall Street have suggested that if the index fails to hold the 3900 level, summer lows may come into play again. —CNBC’s Michael Bloom contributed to this report.