Morgan Stanley believes the earnings recession in 2023 could be similar to what transpired in 2008, and send sharemarkets to fresh lows.
US stocks could be facing the largest fall in corporate profits next year since the global financial crisis, a scenario that is plainly underestimated by investors heading into 2023, Morgan Stanley warned.and the US Federal Reserve, the broker believes that Wall Street’s latest decline has been triggered by investors finally starting to turn their attention to the deteriorating earnings outlook.
Morgan Stanley’s team is feeling more confident about their 2023 forecast for earnings of $US195 per share for the SP 500, which sits well below consensus of $US231 per share. In fact, the broker said it is now leaning towards its bear case earnings per share scenario of $US180.If those projections turn out to be correct, “the price declines for equities will be much worse than what most investors are expecting,” Mr Wilson said.
However, the broker said its forecast remains firmly in the 3000 to 3300-point range, with a bias towards the lower end given its bearish view on corporate profits. That implies a more than 20 per cent plunge from the benchmark’s last close of 3817.7. Many commentators blamed last week’s sell-off on the Federal Reserve flagging that interest rates will stay higher for longer, but Morgan Stanley attributed it to the stockmarket looking ahead to the imminent earnings recession., it believes last week’s price action provided the technical evidence to confirm its thesis.
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