S&P 500 Should End Year at 3,900: Morgan Stanley's Wilson

Goldman Sachs Group Inc.’s David Kostin sees further momentum in the stock market as other sectors catch up with the red-hot rally in tech shares.

Kostin raised his year-end forecast for the S&P 500 to 4,500. And Bank of America Corp.’s Savita Subramanian called an official end to the bear market last week after also lifting her 2023 target.

“The rally clearing the 20% threshold has emboldened more pundits and market participants to declare the official end to the bear market,” Wilson wrote in a Monday note. “We respectfully disagree due to our ‘23 fundamental view, which is now very much out of consensus.”

Wilson was ranked No. 1 in last year’s Institutional Investor survey after correctly predicting the selloff in stocks across 2022. In October, he accurately predicted a short-term rally in US equities but his outlook for a stock slump in 2023 has yet to materialize.

The S&P 500 is up roughly 14% this year (hitting 4,372.50 at 4 p.m. Wednesday in New York), and the Nasdaq 100 has surged 37% (trading at 13,626.48).

To be sure, the strategist remains invested in the US stock market. Wilson is overweight cash and underweight stocks.

The market suffers from “a very broad overvaluation,” he said, but energy and financials are among sectors that can be bought cheaply.

“The question is, ‘What are earnings going to do?’” Wilson said.

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