Bloomberg reported on Monday (14th) that Morgan Stanley strategist Michael Wilson believes that the performance of the US stock market by the end of next year will be similar to the current fundamental level, but it will take a bumpy road to reach the level this.
Wilson said the S&P 500 will have a “tumultuous path” next year to reach its current base level of 3,900, which is about 2 percent lower than at the end of last week. He predicts that stocks will fall as corporate profit expectations fall before rebounding in the second half of next year.
In his report, Wilson notes that the path ahead is much more uncertain than it was a year ago, with many bumps and potential bumps, leaving investors with days/weeks of self-blame who regret trading’ n different However, in the short term, the stock market rally sparked by last week’s October US inflation report will continue for a few more weeks.
Wilson has correctly predicted this year’s stock market crash and was ranked No. 1 in the latest survey of institutional investors. It predicts that US corporate profits will fall by 11% next year, before rebounding strongly in 2024 as positive operating leverage gains.
The report pointed out that Wilson’s comments sounded like another warning for US company profits, which are emerging from the gloom of the weakest earnings season since the first quarter of 2020. This earnings season has been affected’ mainly by high inflation and a stronger dollar. . , Some companies also issued profit warnings.
Wilson predicts the S&P 500 will bottom out at 3,000 to 3,300 in the first quarter of next year, a 17% drop from current levels, so he advises investors to maintain defensive holdings.
As the technology sector’s recent dominance of the S&P 500 erodes, traditional sectors such as energy and banks are gaining ground, with Wall Street strategists adding to the sector, along with health care, utilities and defensive energy stocks.
But JPMorgan strategist Mislav Matejka was more optimistic. In a report on the same day, he wrote that peak bond market yields, cooling inflation, smaller positioning adjustments and smaller-than-usual shrinking profits will continue to support stocks.
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