(Bloomberg) - Morgan Stanley’s Mike Wilson, a well-known stock market skeptic who correctly predicted this year’s slump, believes the bear market in US equities may conclude sooner than investors think.
“We think ultimately the bear market will be over probably sometime in the first quarter,” Wilson said in an interview on Bloomberg Television. “All of this is subject to revision. I want to make clear, if the market starts trading off again and the S&P 500 blows through 3,650 on the downside, we will be bearish again.”
Wilson, who was ranked the best portfolio strategist in the latest Institutional Investor survey, said a 19% slump in the S&P 500 Index this year has left it testing support at its 200-week moving average of around 3,600, which could lead to a technical recovery. The S&P 500 has rallied nearly 6% since Oct. 12, when it closed at lowest since November 2020.
Earlier this week, Wilson reiterated that US stocks could grind higher as investors transition to expectations of falling inflation and lower interest rates. Last week, he wrote in a note to clients that the S&P 500 could rise to 4,150, which at the time was its 200-day moving average, in a bear market rally.
Still, he’s anticipating more pain for equities by the second half of 2023, and Morgan Stanley is forecasting that the S&P 500 will close at 3,900 by next June, according to the latest Bloomberg survey conducted in mid-October. Ultimately, he sees the broad equities benchmark bottoming around 3,000-3,200.
“We’re probably more bearish than most for the outlook next year,” Wilson said. “But we do think this tactical rally is going to be big enough to try and pivot and trade it.”
By Jessica Menton
