Investors have been warned that US stocks could experience a significant selloff in the first half of 2023, with the S&P 500 potentially falling as much as 26%. Morgan Stanley strategists led by Michael Wilson are predicting a bear market bottom this spring, and a recovery in the second half of the year, but with the S&P 500 only ending the year with negligible gains \u2013 3,900 points, versus a December 2022 close of 3,839.<\/p>\n
The sharp rally this year has left US equities the most expensive since 2007 by the measure of equity risk premium, which has entered a level known as the \u201cdeath zone\u201d, according to Wilson.[0]<\/a><\/sup> With the possibility of a Federal Reserve pivot now off the table, Wilson sees a bear case of the S&P 500 falling to 3,500, which is around the same level the stock market bottomed at in October and represents 15% downside from current levels.[1]<\/a><\/sup><\/p>\n JPMorgan Chase & Co. strategist Marko Kolanovic also said he is \u201cturning more defensive\u201d, recommending that investors fade this year\u2019s stock rally as \u201ca recession is currently not priced into equity markets\u201d.[2]<\/a><\/sup> Kolanovic noted that equities have reached near last summer’s highs and at above-average multiples, despite weakening earnings and the recent sharp move higher in interest rates.[2]<\/a><\/sup><\/p>\n The strategists noted that the price is far removed from reality during the current bear market.[3]<\/a><\/sup> Wilson warned that investors may be in the so-called \u201cdeath zone\u201d, where \u201cone starts to see and believe in things that don’t exist\u201d. He likened it to high-altitude mountaineering, where many fatalities occur due to \u201cwrong decisions made under stress or physical weakening that lead to accidents\u201d.[4]<\/a><\/sup> <\/p>\n Ultimately, Wilson warned that \u201cthe bear market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on a Fed pause\/pivot that isn\u2019t coming\u201d.[5]<\/a><\/sup> He cautioned that investors may be ignoring the risks and following stock prices to dizzying heights, but that \u201cthe oxygen eventually runs out and those who ignore the risks get hurt\u201d.<\/p>\n 0. <\/span>“Morgan Stanley Says S&P 500 Could Drop 26% in Months” Yahoo! Voices, 21 Feb. 2023, https:\/\/www.yahoo.com\/now\/morgan-stanley-wilson-says-p-063632540.html<\/a><\/a><\/p>\n 1. <\/span>“Stock Market Just Made The \u2018Same Mistake Again\u2019\u2014Here\u2019s Why Experts Are Worried About The Latest Rally” Forbes, 13 Feb. 2023, https:\/\/www.forbes.com\/sites\/jonathanponciano\/2023\/02\/13\/stock-market-just-made-the-same-mistake-again-heres-why-experts-are-worried-about-the-latest-rally<\/a><\/a><\/p>\n 2. <\/span>“JPMorgan\u2019s Kolanovic Urges Investors to Ditch Stocks for Bonds” Yahoo! Voices, 13 Feb. 2023, https:\/\/www.yahoo.com\/now\/jpmorgan-kolanovic-urges-investors-ditch-202155191.html<\/a><\/a><\/p>\n 3. <\/span>“Morgan Stanley Strategists Say Stocks Ignore Fed, Earnings Reality By Bloomberg” Investing.com, 13 Feb. 2023, https:\/\/www.investing.com\/news\/stock-market-news\/morgan-stanley-strategistssaystocks-ignore-fed-earnings-reality-3001446<\/a><\/a><\/p>\n 4. <\/span>“Stock market has reached the point of ‘speculative frenzy’ – Morgan Stanley’s Wilson” Seeking Alpha, 21 Feb. 2023, https:\/\/seekingalpha.com\/news\/3938312-stock-market-has-reached-the-point-of-speculative-frenzy-morgan-stanleys-wilson<\/a><\/a><\/p>\n 5. <\/span>“Bear market rally ‘based on a Fed pause\/pivot that isn’t coming’: Morgan Stanley strategist” The Globe and Mail, 21 Feb. 2023, https:\/\/www.theglobeandmail.com\/investing\/markets\/inside-the-market\/article-bear-market-rally-based-on-a-fed-pausepivot-that-isnt-coming-morgan<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Investors have been warned that US stocks could experience a significant selloff in the first half of 2023, with the S&P 500 potentially falling as much as 26%. Morgan Stanley strategists led by Michael Wilson are predicting a bear market bottom this spring, and a recovery in the second half of the year, but with the S&P 500 only ending the year with negligible gains \u2013 3,900 points, versus a December 2022 close of 3,839.<\/p>\n The sharp rally this year has left US equities the most expensive since 2007 by the measure of equity risk premium, which has entered a level known as the \u201cdeath zone\u201d, according to Wilson.[0]<\/a><\/sup> With the possibility of a Federal Reserve pivot now off the table, Wilson sees a bear case of the S&P 500 falling to 3,500, which is around the same level the stock market bottomed at in October and represents 15% downside from current levels.[1]<\/a><\/sup><\/p>\n JPMorgan Chase & Co. strategist Marko Kolanovic also said he is \u201cturning more defensive\u201d, recommending that investors fade this year\u2019s stock rally as \u201ca recession is currently not priced into equity markets\u201d.[2]<\/a><\/sup> Kolanovic noted that equities have reached near last summer’s highs and at above-average multiples, despite weakening earnings and the recent sharp move higher in interest rates.[2]<\/a><\/sup><\/p>\n The strategists noted that the price is far removed from reality during the current bear market.[3]<\/a><\/sup> Wilson warned that investors may be in the so-called \u201cdeath zone\u201d, where \u201cone starts to see and believe in things that don’t exist\u201d. He likened it to high-altitude mountaineering, where many fatalities occur due to \u201cwrong decisions made under stress or physical weakening that lead to accidents\u201d.[4]<\/a><\/sup> <\/p>\n Ultimately, Wilson warned that \u201cthe bear market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on a Fed pause\/pivot that isn\u2019t coming\u201d.[5]<\/a><\/sup> He cautioned that investors may be ignoring the risks and following stock prices to dizzying heights, but that \u201cthe oxygen eventually runs out and those who ignore the risks get hurt\u201d.<\/p>\n 0. <\/span>“Morgan Stanley Says S&P 500 Could Drop 26% in Months” Yahoo! Voices, 21 Feb. 2023, https:\/\/www.yahoo.com\/now\/morgan-stanley-wilson-says-p-063632540.html<\/a><\/a><\/p>\n 1. <\/span>“Stock Market Just Made The \u2018Same Mistake Again\u2019\u2014Here\u2019s Why Experts Are Worried About The Latest Rally” Forbes, 13 Feb. 2023, https:\/\/www.forbes.com\/sites\/jonathanponciano\/2023\/02\/13\/stock-market-just-made-the-same-mistake-again-heres-why-experts-are-worried-about-the-latest-rally<\/a><\/a><\/p>\n 2. <\/span>“JPMorgan\u2019s Kolanovic Urges Investors to Ditch Stocks for Bonds” Yahoo! Voices, 13 Feb. 2023, https:\/\/www.yahoo.com\/now\/jpmorgan-kolanovic-urges-investors-ditch-202155191.html<\/a><\/a><\/p>\n 3. <\/span>“Morgan Stanley Strategists Say Stocks Ignore Fed, Earnings Reality By Bloomberg” Investing.com, 13 Feb. 2023, https:\/\/www.investing.com\/news\/stock-market-news\/morgan-stanley-strategistssaystocks-ignore-fed-earnings-reality-3001446<\/a><\/a><\/p>\n 4. <\/span>“Stock market has reached the point of ‘speculative frenzy’ – Morgan Stanley’s Wilson” Seeking Alpha, 21 Feb. 2023, https:\/\/seekingalpha.com\/news\/3938312-stock-market-has-reached-the-point-of-speculative-frenzy-morgan-stanleys-wilson<\/a><\/a><\/p>\n 5. <\/span>“Bear market rally ‘based on a Fed pause\/pivot that isn’t coming’: Morgan Stanley strategist” The Globe and Mail, 21 Feb. 2023, https:\/\/www.theglobeandmail.com\/investing\/markets\/inside-the-market\/article-bear-market-rally-based-on-a-fed-pausepivot-that-isnt-coming-morgan<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":1312,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1316"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=1316"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1316\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/1312"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=1316"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=1316"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=1316"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}