The Tell: The bear market rally is running out of stream, and it is time to take profits, says Morgan Stanley’s Wilson

by | Dec 5, 2022 | Stock Market

The stock market’s bounce off the October lows is running out of room, and it is time to take profits, according to Morgan Stanley’s Michael Wilson. The chief equity strategist who correctly predicted this year’s stock-market selloff, now expects the S&P 500 to resume declines from the beginning of the year, after the benchmark last week crossed above its 200-day moving average. 

“This makes the risk-reward of playing for more upside quite poor at this point, and we are now sellers again,” a team of strategists led by Wilson wrote in a Monday note.  Wilson went from one of Wall Street’s most outspoken bears to a tactical bull in October, when he anticipated a December rally of U.S. equities with the S&P 500 reaching up to 4,150 points. However, as the large-cap index now trades near the bank’s original tactical target range of 4,000 to 4,150, the strategist said investors should consider taking profits and get prepared for the new bear-market lows.  Wilson also said in November the S&P 500 will set a new price trough of 3,000 to 3,300 in the first quarter of 2023, before jumping back to the 3,900-level by the end of the year.  See: This little-known but spot-on economic indicator says recession and lower stock prices are all but certain U.S. stocks fell on Monday after three major benchmarks on Friday posted a second straight week of gains. The S&P 500 on Monday was off 1.6%, trading at 4,006, while the Dow Jones Industrial Average
declined by 1.3% and the Nasdaq …

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