Morgan Stanley chief U.S. stock strategist Michael Wilson believes that a change in the attitude of U.S. stocks cannot change the fact that it is still in a bear market, but a turnaround is a necessary condition for ending the bear market.
As a perpetual U.S. stock bear, Wilson said that in just one week, the market’s view on the global economy has changed, but this will not affect the decline of U.S. stocks in 2023, and the profit prospects of major companies are still not optimistic .
He pointed out that when just entering 2023, most investors expected the U.S. economic recession to start in the first half of this year, but only a week later, the market consensus on the economic recession has undergone a major shift: “As China’s economic recovery stimulates demand As a result of the boost, as well as the slump in European gas prices, more and more investors are beginning to believe that the economy may have a soft landing, while most investors believe that the recession will be delayed until the second half of this year.”
He said that investors can think that the “big turn” against the economic recession has driven the rise of U.S. stocks in early 2023, but in fact, the U.S. stocks that have been severely shorted before are the main factors driving the rise at the beginning of the year: “This year’s rally is driven by the previous low. Quality and being driven by heavily shorted stocks, coupled with a strong move in cyclicals relative to defensives, has also contributed to a strong start to the year for U.S. stocks.”
Wilson said this cyclical rotation led investors to believe they had missed the bottom and had to reposition their prices. But he stressed that the market is still in the final stages of a bear market,S&P 500 IndexNew lows possible: “It’s always possible to fool investors in the final stages of a bear market. It’s always the trickiest, and we’re always on high alert for that illusion.”
He pointed out that from Morgan Stanley’s fourth-quarter financial report, it can be seen that the focus of US stocks this year is not the economic recession but the recession of corporate profits. Is there going to be a recession this year. Earnings are showing a further decline in revenue from last quarter.”
He believes corporate profits are being eroded further and a recession is looming,S&P 500 IndexLikely to set new lows: “The gap between our model and our forecast is the largest in history. Could our model be wrong? Of course, but based on past records, we don’t think it’s going in the wrong direction, it’s just a matter of timing and magnitude question.”
“A profit recession is looming,” he said. “When there is a shift in investor tone, that will further supportS&P 500 IndexA new low is expected, which will bring the bear market to an end later this quarter or early in the second quarter. “