Business

Morgan Stanley’s Mike Wilson warns about the stock market don’t let the ‘bear market mirror house’ fool you


An important week for earnings lies ahead, with the focus on updates from the tech space, which has already laid off thousands of workers.

Among those who didn’t expect good news in the earnings reporting system was Mike Wilson, Morgan Stanley’s director of US equity strategy, who was in our article. call of the day says that investors need to beware of the “bear market mirror.”

A pretty upbeat start to the year for stocks — S&P 500
SPX

has gained more than 3% this year and the Ark Innovation ETF is defeated
ARKK

rose 17% – did not appeal to him. “Suffice it to say, we’re not interested in the recent recovery because our work and processes have convincingly reduced earnings,” Wilson said.

He noted that the early 2023 rally has been led by “low-quality and heavily sold stocks” and a sharp shift to cyclical rather than defensive. “In particular, this cyclical rotation is convincing investors that they are missing a bottom and must reposition,” he told clients in a note on Sunday.

But he cautions that bear markets can mislead a lot of investors before all is said and done, and that they must continue to trust their own process and ignore the noise. “The end of the bear market is always the hardest, and we were on high alert for such fakes, such as the October-December rally that we had,” Wilson said. predicted and traded”.

“After a challenging 2022, many investors are still fundamentally bearish, but question whether negative fundamentals have been priced into the stock,” he said. “Our view is unchanged as we expect the earnings path in the US to disappoint both current valuation and consensus expectations.”

One area that worries him is that the gap between the bank’s earnings outlook and future estimates is “unprecedentedly wide. The last two times our model was much below consensus, the S&P 500 fell 34% and 49%,” he said.

Morgan Stanley

What Wilson expects is an “imminent” earnings recession and subsequent erosion of margins. That will happen when costs grow faster than revenues and companies’ revenues unexpectedly slow, he said.

And while we’re not officially in a recession yet, the consequences for companies are already there — falling sales, bloated inventories and less productive employees. .

All that said, Wilson said that they “welcome the sentiment and positioning of the past few weeks as a necessary condition for the final phase of the bear market to take place.”

The chief equity strategist, who correctly predicted the direction of the 2022 stock market sell-off, warned earlier in the year that a recessionary shock this year could cause the market to drop another 22%. When it comes to Wall Street Predictions for this year’s S&P 500Wilson is on the lower side on expectations the index will end at 3,900.

US Treasury at ‘key point’: Stock, bond correlations change as fixed-income market warns of recession

market

share
DJIA

SPX

CALCULATOR

higher, while treasury bonds
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y

is also inching up, and the dollar
DXY

is the apartment. Much of Asia closed — Chinese markets will be closed for the entire week for the Lunar New Year holiday. Nikkei 225
JP:NIK

achieve.

Bitcoin
BTCUSD
topped $23,000 at the weekendlevels not seen since September despite Genesis Global Capital filing for Chapter 11 bankruptcy last week.

For more market updates plus possible trading ideas for stocks, options and cryptocurrencies, Sign up for MarketDiem by Investor’s Business Daily. And follow MarketWatch Live Blog for more market updates.

rumor

Evoquoa stock
WATER

up 17% after the water treatment company received a $7.5 billion offer from rival Xylem
XYL,

shares fell 9.2%.

Get ready for some of the big tech names to report this week — Microsoft
MSFT,

3M
MMM

and Texas Instruments on Tuesday, Tesla
TSLA

and IBM
IBM

on Wednesday and Intel
INTC

on Thursday. GE
GE,

Johnson & Johnson
JNJ,

3M
MMM,

Boeing airplanes
father,

McDonald’s
MCD,

Passport
DRAW,

letter V
CVX

and AmEx
AXP

will also report.

Genius Group, Singapore-based educational technology company with the stock is up 800% this yearset guidance for 2023, saying it sees 27% higher revenue than 2022 and 30% higher student numbers.

Read: Small-cap companies are chasing naked short sellers in increasing numbers: ‘That’s the biggest risk to mass market health today’

Earning tracking: Microsoft, Tesla and Intel are about to face skeptics

Spotify Technology
PLACE

added to a wave of tech layoffs, with the music streaming company announcing plans to cut 6% of its workforce.

And: Big Tech layoffs aren’t as big as it seems

Top economic indicators will be available at 10am

Read: A recession is coming, economists say. Some even thought it was here

Ken Griffin’s US hedge fund, Citadel, made a record $16 billion last year (postage) last year, according to this estimate.

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chart

“A staggering 40% of the companies on the Russell 2000 list were unprofitable last year. Callum Thomas, head of research at Top-down chartProvide the chart below from @MichealAArouet

@MichaelAArouet

“Throw in a possible global recession and things could go awry. It’s no surprise that fund managers are pulling out of the US stock market,” he said, pointing to this chart from Bank of America:

Bank of America/@Callum_Thomas

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