Morgan Stanley Believes S&P 500 Will Bottom Out Next Year
According to the latest analysis from Morgan Stanley, the S&P 500 index will make a new low during the next year (first few months). However, there's a ray of hope even if the stock market hits a new low - It will allow investors to buy the stock at low prices.
The CIO of Morgan Stanley said that the timeframe for making a new low would be somewhere in the first quarter of next year. For those who have the funds to buy equities, it would be one terrific buying opportunity!
The reason behind framing this as a buying opportunity is 2024! He believes that the earnings will start to accelerate again in 2024, which will ultimately push the equities higher.
S&P 500 Could Reach 3900 In 2023
For 2023, Wilson believes that S&P 500 index will be around 3900 as the market approaches the end of the bear cycle. He also added that the current market conditions suggest that we are already in the final stages of the bear market. However, he also highlighted that these final stages in the markets could be very brutal and challenging.
When asked about some of the challenges faced by the US economy, he highlighted inflation, interest rates, and the talks of a possible recession. All of these factors suppress the risk appetite of the investors. That's why the S&P 500 index is already down by 17% this year.
Somewhere around June, the S&P 500 officially entered into the bearish market cycle. As for the catalyst behind this move, it was the interest rate hikes from the Fed. The Fed is trying to cool down the inflation, which is at 40 year high and was mainly triggered due to the Russia-Ukraine war.
Overall, the fed funds rate has gone from 0% to around 4%, and we have got 4 rate hikes in 2022. As for inflation, it is at 7.7%, while the Fed's inflation target is 2%. So yes, there's still a lot of work to do on the inflation part, but there's also a downside to all of it... The efforts to combat inflation have given rise to a new problem - The risks of recession in the USA are at all times high!