10% Stock Drop 'Highly Likely' Before Election: Morgan Stanley's Wilson

Bearish views have become dangerous for equity strategists, as U.S. stocks keep setting records. The relentless rally has already claimed one of the Street’s most prominent skeptics, as Marko Kolanovic departed from JPMorgan last week.

“In the beginning of the year, we moved away from being too bearish. But at the end of the day, this is a tough gig,” Wilson said. “That’s not an excuse, it’s what we get paid to do. Sometimes we get it right, sometimes we get it wrong. It doesn’t put any pressure on me to do my job any different.”

“The way we get paid by institutional clients is give them a good analysis, a good framework, so they can make their decisions on how they should be investing and that process will never change,” he added.

In this sense, Wilson thinks investors shouldn’t be particularly concerned about a pullback from these levels. Rather, he said it could create opportunities to buy into the market. For now, he suggests focusing on individual stocks rather than indexes.

Wilson and his team continue to recommend high-quality growth names, and quality in general: large-caps, companies with good balance sheets, and those that can deliver on earnings. Momentum will continue, but the problem is it’s hard to find shares in those categories that are cheap, he said.

“If they were to come in 10%, then we’d probably get interested again,” he said.

Mike Wilson of Morgan Stanley. Credit: Bloomberg