"US Equities Face Looming Downturn, Warns Morgan Stanley's Top Strategist"
Morgan Stanley's Top Strategist Warns of Major Correction In US Stocks
According to Morgan Stanley's top strategist, Michael Wilson, US equities are on the precipice of a significant correction. Wilson cites a wall of worry as the primary driver of the correction and has predicted a sharp selloff in the near future. Wilson sees the S&P 500 at risk of a near-term drawdown, with the benchmark index poised to end the year at 3,900, approximately 10% below Friday's close, before rebounding to 4,200 in the second quarter of next year. Wilson has warned that risks for a major correction have rarely been higher.
Morgan Stanley is sticking to its outlook on earnings being below market consensus, expecting S&P 500 earnings per share (EPS) to be $185 this year compared to the average estimate of $220. Wilson cites deteriorating pricing and top-line disappointment as major drivers of the forthcoming earnings misses. Wilson has also reiterated headwinds from deteriorating liquidity, record Treasury issuance levels, and fading fiscal support as factors. He expects value shares to outperform growth in the coming period as investors turn to defensive sectors.
Recent concerns about the hawkish Federal Reserve and the persistent issue of high inflation have also contributed to a market downturn. Investors should keep a close watch on the horizon for possible fluctuations in US equities.
Factors Contributing to the Imminent Downturn in US Equities as Highlighted by Morgan Stanley's Top Strategist
Michael Wilson, Morgan Stanley's top strategist, has warned that US equities are on the verge of a notable correction due to a wall of anxiety. The current conditions could trigger a significant sell-off, with Wilson forecasting a sharp downturn in the near future. The S&P 500 is the benchmark index most at risk of a near-term drawdown, ending the year at 3,900, roughly 10% below Friday's close. Wilson expects equities to rise again in the second quarter of next year to 4,200.
Morgan Stanley's outlook on earnings is unchanged and remains below market consensus, with S&P 500 earnings per share expected to reach only $185, compared to the average estimate of $220. Wilson highlights deteriorating pricing and lackluster earnings growth as the leading factors for the forthcoming earnings misses. He also spotlights headwinds from weakening liquidity due to record Treasury issuance levels and disappearing fiscal support as factors that will lead to a major correction.
In the foreseeable future, Wilson expects value stocks to outperform growth stocks as investors shift towards defensive sectors. Increased concerns about the hawkish Federal Reserve and the protracted issue of high inflation have led to deep concern and apprehension in the market. Investors must keep a close eye on the horizon, as a slight shift in any of these factors could lead to further fluctuations in US equities.
Morgan Stanley's top strategist, Michael Wilson, has raised the alarm on significant risks facing US equities, noting a wall of worry as the primary driver of the looming correction. Wilson predicts a sharp sell-off in the next few months, with the S&P 500 index most at risk of near-term drawdown. His forecast for the benchmark index at year-end is 10% below the Friday close, with a rebound in the second quarter of next year. Morgan Stanley is sticking to its outlook on earnings, remaining below market consensus.
Deteriorating pricing and earnings growth are the leading factors for the earnings misses while disappearing fiscal support and high Treasury issuance levels are expected to drive down earnings. Investors may shift towards defensive sectors, and value stocks may outperform growth stocks in the coming period. The focus on the hawkish Federal Reserve and inflation issues has contributed to deep concern and apprehension in the market, leading to possible further fluctuations in US equities.
Investors must keep an eye on the market and stay current on the latest developments as the situation can change rapidly. With the fragile state of the economy and challenges to corporate profitability, caution is advised when entering or making investments. Hence, it is advisable to analyze and seek professional guidance before making any investment decisions. Above all,