Morgan Stanley issues dire warning to investors who ‘followed prices to dizzying heights’ amid fears S&P 500 could plummet 26% within months
- The three major indices suffered a brutal 2022 and though they have managed a modest rally at the beginning of 2023, a plunge may be around the corner
- Economists at several major banks are predicting a ‘no landing’ scenario, which could create a serious dip in the market
- The S&P 500 could ultimately fall as many as 3,000 points or 26 percent according to one Morgan Stanley strategist
US stocks have risen to unsustainably high levels and are facing near-certain losses once investors realize that the Federal Reserve will likely not pivot later this year, according to a group of Wall Street strategists.
Morgan Stanley chief US equity strategist Michael Wilson issued a note this week arguing that the market has entered a level called the ‘death zone,’ which in mountain climbing is the term used to describe an altitude so high that climbers can’t get enough oxygen.
‘Either by choice or out of necessity, investors have followed stock prices to dizzying heights once again as liquidity (bottled oxygen) allows them to climb into a region where they know they shouldn’t go and cannot live very long,’ he wrote to investors.
‘Many fatalities in high-altitude mountaineering have been caused by the death zone, either directly through loss of vital functions or indirectly by wrong decisions made under stress or physical weakening that lead to accidents.
‘This is a perfect analogy for where equity investors find themselves today, and quite frankly, where they’ve been many times over the past decade.
‘It’s time to head back to base camp before the next guide down in earnings,’ he continued.
Wilson blamed the continued ‘climb’, which could end in catastrophe, on the ‘pursuit of the ultimate topping out of greed.’
He suggested the S&P 500 could ultimately fall as many as 3,000 points in the next several months, down about 26 percent from its current position. Though, for the moment, the index remains up 6 percent since the start of 2023.
That forecast comes following a tumultuous year for the stock market, during which the three major indices shed significant value.
