New Stock Market Low Coming in 2023: Morgan Stanley Strategist
That — combined with the fact that the current equity risk premium is lower than in August 2008 even though valuations are higher — could see the S&P 500 sinking to as low as 3,000 points next year, they said, implying declines of 22% from its Friday close.
To be sure, Wilson doesn’t foresee a systemic financial risk or signs of distress in the housing market and, therefore, doesn’t expect 50% downside for stocks, as in 2008.
A two-month rally in U.S. stocks has fizzled out — keeping the S&P 500 on track for its biggest annual slump since 2008 — following staunchly hawkish signals from the Federal Reserve and the European Central Bank.
U.S. stocks last week failed to overcome a technical downtrend in place since the start of the year, which has put an end to the past three bear-market rallies.
Strategists at Goldman Sachs Group Inc. have also warned about the risk to profit margins next year as inflation remains high.
Among sectors, Wilson said he’s overweight health care, staples and utilities, and underweight discretionary and tech hardware stocks.
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