Need to Know: Markets are getting a wake-up call in 2023, says Morgan Stanley, which offers a plan for investors to get ready.

by | Nov 14, 2022 | Stock Market

Overreacting much? According to Fed Reserve Gov. Christopher Waller and several strategists, last week’s softer-than-expected October CPI that sent the S&P 500 to its best level in five months was overdone. His words may be getting through as stock futures point to a softer start as the last full week before Thanksgiving kicks off. We’ll also get retail sales data this week.

And it’s that time of the year when Wall Street starts rolling out its 2023 market forecasts, an unenviable task for sure. Our call of the day comes from Morgan Stanley where a team led by top U.S. strategist Mike Wilson sees the S&P 500
finishing next year almost on par with where it is now, at 3,900. While that might look a little uneventful, the in-between period will be anything but, once Wall Street gets a wakeup call over earnings hopes that are still far too optimistic, the bank says. “We remain highly convicted that 2023 bottom up consensus earnings arematerially too high,” said Wilson and the team, who revised their 2023 earnings per share forecast down another 8% to $195, which is 16% below consensus and 11% lower annually. “After what’s left of this current tactical rally, we see the S&P 500 discounting the ’23 earnings risk sometime in Q123 via a ~3,000-3,300 price trough. We think this occurs in advance of the eventual trough in EPS, which is typical for earnings recessions,” said Wilson. “Equities should begin to process that growth reacceleration well in advance, and rebound sharply to finish the …

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