U.S. stocks have rebounded recently, however, Morgan Stanley (Morgan Stanley) strategists believe that the selling pressure in U.S. stocks is not over yet, and even if the economy is avoided recession, U.S. stocks will continue to fall.
Mike Wilson, chief U.S. equity strategist at Morgan Stanley, said the bear market will not end as companies face increasing pressure from rising inflation and interest rates in the near term.
Wilson pointed out that Morgan Stanley sees a 36% chance of a U.S. recession in the next 12 months, while rising jobless claims and falling job openings also show signs that the economy is cooling.
Wilson also said that corporate profit growth is likely to slow sharply in the coming quarters, and that most analysts are too optimistic about corporate earnings and margins. “Continued labor, raw material, inventory and transportation cost pressures and slowing demand pose risks to margins that are not reflected in most analysts’ estimates,” Wilson said.
Wilson also said that investors are advised to maintain a defensive mode when stocks rebound, not to be too optimistic until the economy confirms a recession or the risk of recession disappears, and should maintain a defensive posture.
Morgan Stanley expects that pressure will continue to weigh on stocks over the next year, with the S&P 500 forecast at 3,900 in a year, just up from around 3,890 on Monday.
Bank of America strategist Savita Subramanian and others lowered their S&P 500 target price to 3,600 from 4,500, noting that the average decline in the index during a recession is 31%. They said the S&P 500 could hit a level of 3,000-3,200 by the end of the year.