Investors could see the bear market end as soon as early next year, according to Morgan Stanley’s Mike Wilson. Despite the outlook for weaker spending around the holidays, stocks can continue to rise, he said. “We think the market will hold up and that will be another positive catalyst,” Wilson told Bloomberg. Loading Something is loading.
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Investors struggling through a brutal 2022 can look for the bear market to be over as soon as the first quarter of next year, according to Morgan Stanley’s chief stock strategist Mike Wilson.
Wilson has remained bearish on stocks amid the market bloodbath over the past year, as sky-high inflation and persistent rate hikes from the Fed has driven equities down over 20% since the beginning of the year.
But some of those losses have been reversed in recent weeks on earnings beats from tech titans like Netflix – and if S&P 500 stays above the 200-day moving average, a major technical support level, that could boost the index to as high as 4,150, Wilson predicted on Monday.
In a interview with Bloomberg on Wednesday, Wilson added that the upswing could last and end the bear market as soon as the first quarter of 2023, even though holiday sales this year could spark new weakness in the stock market as technical drivers take a back seat to fundamentals.
“We’re pretty discouraged on what we’re going to get from holiday sell-through,” he said, noting that companies may discount products heavily to get rid of extra inventory. “And so that’s when you look at the next chance to perhaps see the fundamentals overtake the technicals on the downside.”
Wilson noted that the outlook was fluid and he would turn bearish again if the S&P 500 fell below 3650. Additionally, disappointing corporate earnings into 2023 could also wipe out any gains in the market, as companies will be forced to revise their targets lower.
“We think the market will hold up and that will be another positive catalyst, because if the market doesn’t go down on bad news, and the market doesn’t go down on bad news and fundamentals, what do you have?” Wilson said.
Other market analysts have argued that the inflation picture is also improving, which could give stocks a lift into next year despite growing recession fears. Fundstrat’s head of research Tom Lee noted that inflation indicators, like housing prices ,are falling rapidly, suggesting the Fed could soon soften its pace of rate hikes and cause stocks to rally as much as 25% by 2023. Wharton professor Jeremy Siegel echoed those points, predicting stocks could rally 30% next year as long as the Fed doesn’t overtighten the economy and tip the US into a recession.