over 2 years ago • 1 min
It’s the time of year when Wall Street strategists start publishing their predictions for the next 12 months. And Morgan Stanley has raised some eyebrows with an unusually bearish call for US stocks in 2022.
The bank’s strategists – who look across markets with a bird’s eye view rather than the analysts who study single companies – reckon the S&P 500 will end next year at just 4,400. As the chart above shows, that’s some 6% below its current level.
Morgan Stanley warned in a report on Sunday that US stocks look expensive considering that support from the Federal Reserve is likely to fade next year. The strategists recommended investors instead check out stocks in Europe and Japan, where markets are more reasonably priced compared to earnings.
Wall Street strategists tend to play it safe and in aggregate predict an annual S&P 500 gain of about 10%, which is after all broadly how much stocks climb each year on average. So by actively calling for a drop, Morgan Stanley is going out on a limb.
For comparison, this time last year – when the S&P 500 was at about 3,600 – the average strategist forecast compiled by Bloomberg predicted an unremarkable 8.5% gain in 2021. And even the most bearish only called for markets to end the year unchanged.
Of course, making predictions is hard, even for the pros. And this year’s 25% gain in the S&P 500 has exceeded even the most optimistic of Wall Street’s forecasts. But it’ll be fascinating to see if Morgan Stanley’s pessimistic call encourages more bears out of their caves.
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