A trader works on the floor of the New York Stock Exchange

Morgan Stanley’s Mike Wilson has said the risks of a recession are rising and stocks could fall another 20% if growth goes into reverse.
The chief US equity strategist said that even if the economy avoids recession, stocks still likely have a way still to fall.
Wall Street analysts have downgraded their forecasts for the US economy after the Fed hiked rates by 75 basis points last week.

Morgan Stanley’s chief US equity strategist has said the risks of a recession are rising and that stocks could tumble another 20% if economic growth goes into reverse.

“At this point, a recession is no longer just a tail risk given the Fed’s predicament with inflation,” Mike Wilson, who was ahead of much of Wall Street in predicting a sharp drop in stocks, said in a note Tuesday.

Wilson said Morgan Stanley’s economists now put the chance of a recession over the next year at 35%, up from 20% previously. But he said he personally thinks the chances are a bit higher.

The strategist said that although stocks have fallen sharply, they are not yet at levels reflecting a recession.

He said the S&P 500 would likely tumble to 3,000 if the US economy started to go backwards — roughly 20% lower than Tuesday’s price.

But Wilson said he sees more downside for equities even if the US economy manages to avoid a recession.

He said the S&P 500, the US benchmark index, is likely to fall by another 7% to 10% — to around 3,400 to 3,500 from roughly 3,770 on Tuesday — as company earnings suffer under the weight of inflation.

The index has already tumbled more than 20% from its recent high in early January, as the Federal Reserve hikes interest rates to tame …read more

Source:: Business Insider


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