Morgan Stanley on US stocks – "risks for a major correction have rarely been higher"
<p>A note from US equity strategist at Morgan Stanley Michael Wilson</p><ul><li>said "risks for a major correction have rarely been higher"</li><li>"In our view, the headwinds significantly outweigh the tailwinds," </li><li>"Our highest conviction view remains our well below consensus forecast for earnings this year—our base case 2023 EPS for S&P 500 is $185 (Bear $170/Bull $210) which compares to bottom-up consensus at $220 and top-down/buyside forecasts near $210-215."</li><li>
"While last year's earnings misses were mostly a function of bloated cost structures as pandemic demand normalized, we believe the next leg will be about deteriorating pricing and top line disappointment," </li></ul><p>And added:</p><ul><li>the liquidity picture is starting to deteriorate due to record levels of Treasury issuance and QT … Morgan Stanley estimating bank reserves will contract by $500 billion to $800 billion over the next six months which they see as likely having a negative impact on equity valuations</li></ul><p>—</p><p>Morgan Stanley have been bears all year on this market, their expectation for a market slump in 2023 has yet to materialize. Still seeing the S&P 500 at risk of a near-term drawdown.</p>
This article was written by Eamonn Sheridan at www.forexlive.com.
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