One of Wall Street’s biggest bear says stocks poised for next leg lower as profits shrink
One of Wall Street’s biggest bears believes U.S. stocks are poised for their next leg lower as the January effect and other factors that had supported markets in the early weeks of the New Year have started to fade.
In a note to clients dated Monday, Mike Wilson, chief U.S. equity strategist and chief investment officer at Morgan Stanely, said “the door is still very much open” for U.S. stocks to fall as investors grappled with an earnings outlook that has substantially weakened during the month of January. According to data from FactSet, the calendar-year EPS expectations for 2023 fell by 2.5% during the first quarter to $224.88. At this level, corporate earnings would be contracting, not growing.price downside in equities comes after forward EPS growth goes negative. In other words, this earnings recession is not priced, in our view,” Wilson said.
But while other periods of deterioration coincided with a Federal Reserve that was cutting interest rates to protect the economy, Wilson said that this time around, the Fed is still hiking interest rates, with no plans to start cutting until 2024 according to the central bank’s official projections.To be sure, Wilson says there are other reasons to be bearish on U.S. stocks besides the fundamental earnings picture.