Morgan Stanley’s top strategist says this is when bear market ‘probably ends’

With US stocks down more than 20% so far this year, investors are looking for some good news – and it could come from a leading Wall Street analyst who says the current bear market could end around Valentine’s Day. Patrician.

In an interview with Bloomberg Television, Morgan Stanley equity strategist and chief investment officer Mike Wilson predicted that the bear market in US equities could come to an end in early 2023. Investors are taking note because Wilson, who typically skeptical of the market , he is listed #1 in Institutional Investor’s recent portfolio strategist rankings.

“We think ultimately the bear market will probably end in the first quarter,” Wilson said on the broadcast.

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On the other hand, Wilson would appear to have a completely opposite point of view to what other Morgan Stanley analysts are telling clients. In a post from the end of September On MorganStanley.com, Lisa Shalett, the firm’s Chief Investment Officer for Wealth Management, wrote that “Morgan Stanley’s Global Investment Committee believes this bear market is far from over.”

Wilson cited the S&P 500 200-week moving average as a leading indicator. This indicator was equal to 3,612 at the end of October. On Nov. 30, the S&P 500 closed above its 200-week moving average for the first time since April 7. As long as the index stays above that average, shares could rally to 4,150. If the index breaches the 200-week barrier, however, Wilson said, investors should take that as a signal to start selling.

As quoted in Markets Insider, Wilson said, “The 200-week moving average is an extremely powerful technical support level for stocks, particularly in the absence of a full-blown recession that we don’t have yet.”

The S&P 500 rallied in October, gaining between 2% and 4% on positive earnings news. After starting the year at 4,800, the index dropped slightly below 3,500 in the first few weeks of October before recovering to around 3,800. In November, it climbed north of 4,000. As long as this current earnings trend holds steady, Wilson said, the bear market will end in the first quarter of 2023.

Meanwhile, however, come holiday sales along with fourth-quarter and year-end earnings results. A weak holiday sales season may be ahead, as retailers have already discounted excess inventory as consumers have returned to buying more services and fewer goods as the COVID-19 pandemic slows down.

If that happens, Wilson said, investors will need to place more emphasis on fundamentals, such as sales and earnings, rather than technical indicators such as the 200-week moving average.

If Wilson is right and the stock sends the S&P 500 higher to above 4,100 (it’s currently at 4,046), that would be a significant gain over Morgan Stanley’s estimate that the index will be near the 3,900 level by June.

“We’re probably more bearish than most on next year’s outlook,” Wilson told Bloomberg. “But we think this tactical rally will be big enough to try to pivot and trade that.”

Bottom line

Mike Wilson, Equity Strategist and Chief Investment Officer at Morgan Stanley, says the bear market could end in the first quarter of 2023. He based his analysis on the 200-week moving average of the S&P 500.

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Photo credit: ©iStock.com/Dilok Klaisataporn

Post Top Morgan Stanley Strategist Says This Is When The Bear Market “Probably Will End” first appeared on the SmartAsset Blog.

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