The Fed in 2022 has hiked the fed funds rate from 0% to a range of 4.25%-4.5%, including four consecutive, hefty hikes of 0.75 percentage points. Inflation cooled down somewhat in October, but the monthly headline rate of 7.1% through November exceeds the Fed’s 2% target.
“Now it’s a more of a two-way risk. And I think we’re going to be in that two-way risk probably until the year end,” Wilson added, said the first 7-8 months of the year was a “straight down move.”
“The final move of the bear market probably comes next year in the first quarter, when the earnings finally catch up to where we think they’re going to be next year,” he said.
Wilson said earnings expectations for next year are 20% too high, but suggested that volatility, rather than a hit to stock prices, is in focus for Morgan Stanley.
“As bearish as we are next year on earnings, the price damage probably isn’t that bad over the next 12 months, it’s the path that’s going to be really tricky,” he said.
