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MORGAN STANLEY

BANK OF AMERICA

By Staff Reporters

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[The Scream is a composition created by Norwegian artist Edvard Munch in 1893]

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What [another] a week? U.S. equities declined, posting a second-straight weekly loss, as recession worries have ratcheted higher in the wake of a host of global central bank actions earlier this week. The Fed’s mid-week 50 basis point rate increase was followed by similar actions from the European Central Bank, the Bank of England, and Swiss National Bank. The moves came amid an evident slowdown in global economic growth, with data released today showing most manufacturing and services PMIs domestically and across the globe continue to see a contraction in activity, adding fuel to the recessionary fears.

RECESSION?

With U.S. stocks down more than 20% so far this year, investors are looking for some good news – and it may be coming from a prominent Wall Street analyst who says the current bear market could come to an end sometime around St. Patrick’s Day, 2023.

In an interview with Bloomberg Television, Mike Wilson, the Equity Strategist and Chief Investment Officer for Morgan Stanley predicted that the bear market in U.S. stocks could come to a conclusion early in 2023. Investors are taking note because Wilson, who’s typically skeptical about the market, is listed as No. 1 on Institutional Investor’s recent ranking of portfolio strategists.

WHEN?

“We think ultimately the bear market will be over probably sometime in the first quarter,” Wilson said on the broadcast.

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Mutual Fund managers have taken their cash positions to the highest level in 21 years, according to the long-running monthly survey of portfolio managers. Relative to the history of the survey, investors are 2.6 standard deviations overweight cash and 3 standard deviations underweight equities.

A net 72% expect a weaker economy in the next 12 months, and 91% say earnings are unlikely to rise 10% of more in the next year. A growing percentage are expecting a policy pivot: 28% expect lower short-term rates in the next 12 months, up from 14% in September.

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The survey “screams macro capitulation, investor capitulation, and crucially start of policy capitulation,” said Bank of America strategists led by Michael Hartnett. The S&P 500 has dropped 23% this year, and S&P’s U.S. government bond index has declined by 12%.

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Filed under: "Ask-an-Advisor", Alerts Sign-Up, Alternative Investments, Experts Invited, Financial Planning, Investing, LifeStyle | Tagged: Bank of America, BoA, Brobdingnagian, capitulation, Michael Hartnett, Mike Wilson, Morgan Stanley, Munch, stock market capitulation |