A Morgan Stanley exec says S&P could drop to 3000s lows
Mike Wilson, Director of US Equity Strategy and Chief Investment Officer at Morgan Stanley.
Adam Jeffery | CNBC
The S&P 500 Mike Wilson, director of US equity strategy at Morgan Stanley, who correctly identified the downside in this difficult year for the market.
“We’re in a cyclical downturn in growth, and that’s the frosty short story, isn’t it – policy tightening and growth slowing,” he said Monday on CNBC.Squawk . Box. “” And we’re just not done in our predictions. “
Market watchers have questioned where the market’s “bottom” will be now as the Federal Reserve appears poised to accept a recession to win the war on inflation.
Wilson’s bear box for the S&P 500 is around 3,000, with his base box at 3,400. The strategist said he sees potential for both cases with a soft landing for earnings now less likely. These estimates suggest a decline of about 8% to 18% from current S&P 500 levels.
The rapid change in rates is another bad sign in the strategist’s view with one year treasury bill output passed 4% second.
This could be an unusual time in the market, Wilson said. The jobs picture can create confusion about the state of the economy, as labor shortages cause wages to rise, which is not usually seen during a recession.
Wilson also notes that a lot of money is falling sharply compared to other times when the economy is down, but he wouldn’t use that to bet on where the market goes.
He said the effort to contain inflation was the “medicine” to get the country out of the “debt trap” that the country had been trying to get out of since the 2008 recession. He said the market needed time to adjust. against the opposite movements when the Fed tries to control inflation through raising interest rates.
To be sure, Wilson said we’re close to a turning point and he’s ready to jump into action when the market hits the company’s target. The S&P 500 is down 23% from its peak and near a two-year low.
“We’re getting close to the end,” he said. “The damage has been done. … Now, we’re really starting to get ready to hit harder. In our view, it’s just not time yet, and leaving early can be quite costly. .”