(Bloomberg) — Morgan Stanley’s Mike Wilson, a well-known stock market skeptic who correctly predicted this year’s downturn, believes the bear market in U.S. equities may come to an end sooner than investors think.

“We think the bear market will probably end in the first quarter,” Wilson said in an interview on Bloomberg Television. “This is all subject to review. I want to make it clear, if the market starts trading again and the S&P 500 blows through 3,650 on the downside, we will be bearish again.”

Wilson, ranked as the top portfolio strategist in the latest Institutional Investor survey, said the S&P 500 Index’s 19% decline this year has left it testing support at its 200-week moving average of around 3,600, which could find a technical technique. recovery The S&P 500 has rallied nearly 6% since October 12, when it closed at its lowest level since November 2020.

Earlier this week, Wilson reiterated that US stocks could grind higher as investors transition to falling inflation expectations and lower interest rates. Last week, he wrote in a note to clients that the S&P 500 could rise to 4,150, which was then its 200-day moving average, in a bear market rally.

Still, he expects further pain for equities by the second half of 2023, with Morgan Stanley forecasting the S&P 500 to close at 3,900 by next June, according to the latest Bloomberg survey conducted in mid-December Autumn. Ultimately, he sees the broad equity benchmark bottoming out between 3,000-3,200.

“We’re probably worse than most for the outlook next year,” Wilson said. “But we think this tactical rally will be big enough to try to pivot and trade it.”

Not all strategists are optimistic that US equities will recover soon. Goldman Sachs Group Inc. strategists said. in a note to clients on Tuesday that the conditions for a trough are not yet evident as stocks do not fully reflect the latest rise in real yields and the potential for a recession.

Even some of Wall Street’s savviest bulls are turning sour on the equity market. On Monday, JPMorgan Chase & Co.’s Marko Kolanovic, who has been Wall Street’s most vocal bullish this year, said U.S. stocks were poised for gains before the end of the year, but said it is expect 2023 to be a “more challenging earnings backdrop. relative to current expectations.”

Last week, Kolanovic cut the size of his overweight equity and overweight bond allocations, citing increased risks from central bank policies and geopolitics. Earlier this month, he said such risks could jeopardize the bank’s year-end S&P 500 target of 4,800.

–With assistance from John McCorry, Farah Elbahrawy, Abhishek Vishnoi and Sagarika Jaisinghani.

(Updates to the fourth through tenth paragraphs.)

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