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Morgan Stanley Predicting More Pain Short-Term; Says Rolling Bear Market Coming To End

  • Wall Street Rebel | James DiGeorgia
  • 10/17/2018 3:04 PM
Morgan Stanley Predicting More Pain Short-Term; Says Rolling Bear Market Coming To End

S&P downside target 2500– 2600 and then a turnaround.

By James DiGeorgia

Morgan Stanley's chief U.S. equity strategist, Mike Wilson is predicting the stock market sell-off we’ve seen in the last couple of weeks -- is only going to get worse.

In a note to Morgan Stanley's clients sent this past Monday, after more than a 1370 point two day sell-off last week, Wilson wrote

 “the pain is not over for growth, discretionary and tech stocks.

Wilson went on to write

"We continue to believe we are in the midst of a rolling bear market across all global risk assets caused by a drain in liquidity and peaking growth," … "Sooner or later, the rolling bear will likely be back for more."

Wilson had been quoted last week thatrising interest rates served as the "tipping point" for the rolling bear market to finally hit the U.S. and "take out the last holdouts" which he identified as growth, discretionary and tech stocks.

The move higher in rates is primarily due to the Federal Reserve accelerating its balance sheet reduction, along with the European Central Bank beginning to taper its quantitative easing program, he said in Monday's note.

Wilson is predicting that global liquidity is "going to get worse" as we approach the end of 2018. However, Wilson is also making it clear he thinks that we're in the "last phase" of the rolling bear market. He predicts perhaps another 10 percent decline in U.S. growth and small-cap stocks or even 15 percent in some names. His bottom line prediction is the S&P 500 could get down to 2,600 or even 2,500 if "it gets really nasty."

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Wilson is saying

"There are names to buy. There's been a lot of damage this year already, and some bargains have been created It's just hard to pick stocks right now because of the liquidity situation, which is a market eventIt's going to be tricky in here the next couple of weeks…"

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