Morgan Stanley’s Wilson Sees No Reason To Raise S&P 500 Target
As a flurry of Wall Street forecasters bump up their optimism toward US stocks in lockstep, Morgan Stanley’s Mike Wilson won’t budge, arguing he sees no justification to upgrade his outlook given an absence of broad earnings growth.
(Bloomberg) -- As a flurry of Wall Street forecasters bump up their optimism toward US stocks in lockstep, Morgan Stanley’s Mike Wilson won’t budge, arguing he sees no justification to upgrade his outlook given an absence of broad earnings growth.
The strategist stuck to his year-end S&P 500 Index forecast of 4,500 in an interview on Tuesday with , even as a growing list of peers at firms including Bank of America Corp., Goldman Sachs Group Inc., and UBS Group AG have raised projections for the benchmark.
Wilson’s call is roughly 12% below the S&P 500’s closing level Monday of around 5,118, and 8% short of the average year-end call of Wall Street strategists tracked by Bloomberg, of 4,915. Among the big banks, only JPMorgan Chase & Co. has a lower 2024 forecast than Wilson’s.
“A lot of folks have raised their price targets because of higher multiples,” Wilson said. We’re not willing to do that.”
His skepticism comes in the face of a sharp rally in US stocks since October. The S&P 500 gained in 16 of the past 19 weeks amid enthusiasm around corporate earnings, artificial intelligence and economic strength. The index resumed its climb Tuesday after declining the past two sessions. The day’s advance followed a hotter-than-forecast inflation reading that left intact expectations for at least three Federal Reserve interest-rate cuts by year-end.
Wilson’s more optimistic counterparts at rival banks have pointed to strength from US firms and the economy in the face of tighter monetary policy. But he said Tuesday that broader earnings growth is still missing.
Earnings for the S&P 500 grew 7.4% in the fourth quarter from the same time a year ago. Excluding the Magnificent Seven group of technology giants, profits in the index posted a 1.7% contraction, data compiled by Bloomberg Intelligence show. Wilson also added that “the risk of a hard landing has still not been exterminated.”
The strategist has been one of Wall Street’s most prominent bears in recent years. He kept his call for a market decline throughout 2023 as the S&P 500 soared 24%, after correctly predicting 2022’s rout. He’s since taken a more constructive view on US equities.
In Wilson’s view, speculative activity across the market has picked up in a “meaningful way.” He pointing to the rising popularity of zero-day options trading and use of leverage, noting that exuberance is high.
“Now, it doesn’t have to end in tears,” he said. “Leverage isn’t always bad. We have a situation where people are reaching for risk because there is FOMO.”
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