The S&P 500 is flirting with a bull market after surging nearly 20% from its October low, but not everyone is convinced the good times will keep rolling. In a research note published over the weekend, strategists at Morgan Stanley said they expect a sudden pullback in corporate earnings to slam the brakes on the US stock rally. More specifically, they expect earnings per share for the S&P 500 to drop 16% this year, driven by slowing revenue growth and shrinking profit margins. On the back of that, the investment bank expects the S&P 500 to end 2023 at 3,900 – roughly 9% below today’s level.

Instead, the strategists are optimistic about stocks in Japan, Taiwan, and South Korea. The tech-heavy markets of Taiwan and South Korea, after all, are seeing their world-leading semiconductor companies benefit from the booming demand for all things AI. Corporate reforms and a recent endorsement by Warren Buffett, meanwhile, have stirred excitement for Japan’s undervalued stocks, sending them to a three-decade high. The strategists also recommend that investors hold defensive stocks, investment-grade corporate bonds, the US dollar, and government bonds from advanced economies, particularly long-term US Treasuries.

To be sure, not all strategists are as pessimistic as Morgan Stanley’s when it comes to the US stock market. Goldman Sachs, for example, anticipates mild growth in S&P 500 earnings per share in 2023. And Evercore ISI recently raised its S&P 500 year-end target by 7%, to 4,450. The firm believes that easing inflation will push the Federal Reserve to pause its interest rate hikes and that the stimulus provided during the pandemic will continue to support the stock market.