Investors should brace for a sharp selloff in US stocks within months, as earnings outlook downgrades cause prices to plunge, Morgan Stanley’s investment chief has warned.
The S&P 500 could decline to 3,000 points in the early months of 2023 — the bank’s bear case for the period, chief US equity strategist Mike Wilson told CNBC Tuesday.
If the benchmark stock index does slump that low, it will represent a 24% decline from Tuesday’s closing level of 3,958.
“You should expect an S&P between 3,000 and 3,300 some time in probably the first four months of the year,” he said. “That’s when we think the deceleration on the revisions on the earnings side will kind of reach its crescendo.”
Wilson is expecting fears of looming recession to cause major publicly listed companies to lower their earnings targets, meaning that stocks would remain in the bear territory where they have spent most of this year.
“The bear market is not over,” Wilson said. “We’ve got significantly lower lows, if our earnings forecast is correct.”
