The S&P 500 could fall another 22% and investors' view of more downside for stocks is too mild, Morgan Stanley says
Investors should brace for an much bigger decline in the US stock market than they are expecting for 2023, Morgan Stanley told clients Monday.
"Our concern is that most are assuming 'everyone is bearish,' and, therefore, the price downside in a recession is also likely to be mild . On this score, the surprise might be how much lower stocks could trade if a recession arrives," wrote Michael Wilson, chief US equity strategist at Morgan Stanley, in a note.
. A slide in bond yields after separate services-sector data from the Institute for Supply Management also contributed to sending stocks higher Friday. However, this"ignores the ramifications of falling prices on profit margins, which is likely to outweigh any benefit from the perceived Fed dovishness equity investors are dreaming about later this year," said Wilson.
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