A note from US equity strategist at Morgan Stanley Michael Wilson
- said "risks for a major correction have rarely been higher"
- "In our view, the headwinds significantly outweigh the tailwinds,"
- "Our highest conviction view remains our well below consensus forecast for earnings this year—our base case 2023 EPS for S&P 500 is $185 (Bear $170/Bull $210) which compares to bottom-up consensus at $220 and top-down/buyside forecasts near $210-215."
- "While last year's earnings misses were mostly a function of bloated cost structures as pandemic demand normalized, we believe the next leg will be about deteriorating pricing and top line disappointment,"
And added:
- the liquidity picture is starting to deteriorate due to record levels of Treasury issuance and QT ... Morgan Stanley estimating bank reserves will contract by $500 billion to $800 billion over the next six months which they see as likely having a negative impact on equity valuations
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Morgan Stanley have been bears all year on this market, their expectation for a market slump in 2023 has yet to materialize. Still seeing the S&P 500 at risk of a near-term drawdown.
