The S&P 500 Index could fall 24% from current levels in early 2023, said Morgan Stanley’s chief equity strategist Mike Wilson. Investors could face a strong market decline as company performance forecasts begin to be revised, hitting stock prices.
Market outlook and tactical rally – According to Morgan Stanley’s baseline forecast, the S&P 500 Index will finish next year at 3,900 p, but the dynamics will not be calm. Rather, the stock market could be in for a “wild ride,” Wilson warned.
– In the first four months of 2023, the index could fall nearly a quarter from current levels into the 3000-3300p range, the strategist said. That’s when corporate earnings forecasts will hit their low point. After that, the stock market will begin to recover for the rest of the year.
“The bear market is not over. New lows await us if our forecasts for corporate earnings turn out to be correct,” the expert added.
– The fall could be seen across the entire spectrum of securities. Shares of large companies, not only from the technological sector, but also from the consumer and industrial one, might suffer more than others. Nevertheless, Wilson believes that investors should not get rid of stocks at the moment.
“Now is not the time to sell everything and run away, because the decline probably won’t happen until earnings forecasts fall in January through February,” the strategist said.
– Over the next few weeks, Wilson doesn’t rule out continued positive sentiment and a small tactical rally in the stock market for the rest of the year.