US stocks will end 2023 almost unchanged from their current level -- but will have a bumpy ride to get there, according to Morgan Stanley’s Michael Wilson.
The top-rated strategist sees a “volatile path” to get to his 2023 year-end S&P 500 base-case target of 3,900 index points, about 2% below where the gauge closed on Friday. He expects stocks to fall as earnings estimates come down, before rebounding in the second half of the year.
“The path forward is much more uncertain than a year ago, and likely to bring several twists and days/weeks of remorse for investors regretting they traded it differently,” Wilson wrote in a note on Monday. In the short-term, he sees the stock-market rebound sparked by last week’s good inflation data running for a few more weeks.
The portfolio strategist -- who correctly predicted the slump this year and is ranked No. 1 in the latest Institutional Investor survey -- said consensus earnings estimates for 2023 are still much too high. His base case is for US company profits to decline 11% in 2023, before a strong rebound in 2024 as positive operating leverage returns.
His comments sound another warning for US companies wrapping up their weakest earnings season since the first quarter of 2020, marked by the impact of high inflation, a stronger dollar and some dramatic profit warnings.
