Morgan Stanley’s Wilson Says Too Much Optimism in Stock Prices

US equity investors are in for disappointment as economic growth is set to be weaker than expected this year, according to Morgan Stanley’s staunch bear, Michael Wilson.

The strategist’s warning contrasts with the rally on Wall Street, driven by expectations the economy can withstand the Federal Reserve’s hiking campaign, which is seen as peaking soon. Tech stocks have outperformed on the excitement around developments in artificial intelligence.

“At current prices, markets are now expecting a meaningful re-acceleration in growth that we think is unlikely this year, especially for the consumer,” Wilson wrote in a note on Tuesday. “Potentially softer September and October data is not priced into many stocks and expectations.”

Last month, Wilson — whose negative outlook on stocks hasn’t materialized yet this year — said the “risk-off complexion” of markets will last through fall and potentially winter. Some other strategists echo his bearish view, like Bank of America Corp.’s Michael Hartnett, who said US stocks still face a pullback from the risk of a hard economic landing. JPMorgan Chase & Co.’s Mislav Matejka said there is complacency in US stock sentiment, warning that there is no more safety net to cushion equities.