Morgan Stanley forecasts a sharp decline in the US S&P 500 index in early 2023 due to a revision of forecasts on the level of future earnings of companies. Compared to current values, the market could fall by about 24% more
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The S&P 500 could fall 24% from its current level in early 2023, informed Mike Wilson, Chief Equity Strategist at Morgan Stanley, in an interview with CNBC. Investors could face a sharp decline in the US stock market early next year as companies begin reporting lower earnings forecasts, which will hurt stock prices, the expert warned.
Morgan Stanley’s target level for the S&P 500 index at the end of next year is 3900 points. But stock market dynamics will not be smooth. Rather, the stock market could expect a “wild ride,” the analyst warned.
bear market
it’s not over yet, and the S&P 500 will make significantly lower lows, he added.
The S&P 500 closed at 3,957.6 on Tuesday, Nov. 29, down 17% year-to-date. In the first four months of 2023, the index could fall another quarter from current levels. Mike Wilson expects the S&P to fall into the 3000-3300 range in the first four months of next year. This is when the drop in corporate earnings forecasts will reach its peak, the expert stressed.
The fall can be observed across the entire spectrum of cards. Large companies can suffer more than others, and not only the technology sector, but also the consumer and industrial sectors.
Still, while investors shouldn’t get rid of all the stock, Wilson believes. “Now is not the time to sell everything and run to hell, because the drop probably won’t happen until earnings forecasts drop in January-February,” he said. In the coming weeks, the expert does not rule out the continuation of the positive sentiment and a small “tactical” rally of the stock market until the end of the year.
Investors and traders in the stock market, looking to capitalize on a decline in the value of assets. This strategy is applied to short (as opposed to “bulls”) positions.
