Markets are getting a wake-up call in 2023, says Morgan Stanley, which is offering a plan for investors to prepare.

Markets are getting a wake-up call in 2023, says Morgan Stanley, which is offering a plan for investors to prepare.

Federal Reserve Governor Christopher Waller and several strategists said last week’s weaker-than-expected October CPI, which sent the S&P 500 to its best level in five months, was overblown.

His words could be heard as stock futures point to a softer start in the last full week before the start of Thanksgiving. We will also have retail sales data this week.

And it’s at this time of year that Wall Street starts rolling out its 2023 market forecast, an unenviable task for sure. Our call of the day comes from Morgan Stanley where a team led by America’s top strategist Mike Wilson sees the S&P 500 SPX
ending next year almost on par with its current level, at 3,900.

While it may seem a bit uneventful, the interim period will be anything but once Wall Street receives a wake-up call on earnings hopes that are still far too optimistic, the bank says.

“We remain firmly convinced that the bottom-up consensus earnings of 2023 are
materially too high,” said Wilson and the team, who revised their 2023 earnings per share forecast down another 8% to $195, 16% below consensus and 11% lower annually. .

“After what remains of this current tactical rally, we see the S&P 500 discounting the risk of 23 earnings in the 12th quarter via a price bottom around 3,000 to 3,300. ‘potential dip in EPS, which is typical of earnings recessions,’ Wilson said.

“Equities should start to process this reacceleration in growth well in advance and rebound strongly to end the year at 3,900 in our base case,” he said.

As for portfolio moves, Wilson said they will remain defensive until those estimates “reflect the collapse.” They upgraded commodities to overweight them and reduced real estate to an equal weight, leaving overweights also in healthcare, utilities and defense.
oriented energy values. Consumer Discretionary and Tech Hardware remain unchanged as underweights.

The eventual silver lining is that a turbulent 2023 may give way to a better 2024, where Wilson and co. see a strong rebound as growth in operating leverage is positive – revenues are growing faster than expenses – “i.e. the next boom”.

As for the current market situation, Wilson warns investors to remain flexible, referring to the bank’s bullish tactical turn four weeks ago.

“After a 12-month period where downside stubbornness paid off, we believe we will now enter the final stages of the bear market where two-way risk must be respected,” he said. .

He sees a “window of opportunity when long-term interest rates generally decline before the depth of the slowdown is reflected in earnings estimates and the economy”, defining it as a late-cycle period between the latest Fed hike and the recession.

Morgan Stanley/Bloomberg

But remember they are talking about break here only. “So while we believe there is a window for equities to reach the end of the year as markets dream of a pause, a Fed cut is likely a bad sign that the recession is upon us ( negative payroll),” Wilson said. His chart shows that stocks are not reacting well to this:

Morgan Stanley/Bloomberg

The steps

ES00 Equity Futures

NQ00

ES00
are slightly lower, CL oil prices
flat, while the dollar DXY
is higher, perhaps taking inspiration from Waller’s comments from the Fed. It was a mixed Asian session, with gains in Hong Kong HK:HSI,
losses in Tokyo JP:NIK.

The buzz

Retail sales, the state of manufacturing in New York and some housing market data are in the spotlight this week. The New York Fed’s 1- and 5-year inflation expectations are due Monday.

Tyson TSN Foods
will release its results on Monday, with retailers also in the spotlight like Walmart WMT
and Home Depot HD
report on Tuesday, with Target TGT
Wednesday, with Cisco CSCO
and Nvidia NVDA.

DIS Disney
Marvel-owned sequel ‘Black Panther: Wakanda Forever’ saw second-best opening weekend of 2022, and AMC shares AMC
are up in premarket.

“Fix your businesses. Or Congress will,” Sen. Ed Markey fires back at Tesla TSLA
leader Elon Musk over insulting Twitter owner. Musk, meanwhile, told a G20 forum that he had “too much work” on his plate.

Midterm, victories in Nevada and Arizona mean Democrats will cling to the Senate, with Republicans within 10 wins of controlling the House.

Former FTX chief executive Sam Bankman-Fried sent confusing tweets as investors continue to watch the fallout from his bankrupt crypto exchange. BitcoinBTCUSD
is slightly higher at $16,775.

And: You need to understand what’s going on at FTX, even if you don’t have crypto

US President Joe Biden holds his first face-to-face meeting with Chinese President Xi Jinping on Monday on the sidelines of the G20. And shares of Chinese property stocks soared on Monday after Beijing approved aid measures for the struggling sector.

The best of the web

Concerns are growing about the health impact of puberty blockers.

Older workers need to stop complaining about their younger colleagues.

Tesla finds a loophole in states where dealerships are banned: tribal lands.

Table

Should the stock market rally go further? Look at the 200-day moving average on the S&P 500, some say.

“It provided very tough resistance in March and August. Therefore, if it can significantly break above that line, it will signal that the Q4 rally could/should last through the end of the year,” said Matt Maley, chief market strategist at Miller+ Tobacco. roundup. Here is his chart:

Miller + Tabak/Bloomberg

Stock tickers

Here are the most searched tickers on MarketWatch as of 6 a.m. EST:

Teleprinter

Security Name

TSLA

You’re here

EMG

GameStop

CMA

AMC Entertainment

NIO

NIO

DWAC

Digital World Acquisition Corp.

AAPL

Apple

AMZN

Amazon.co.uk

MULN

Mullen Automotive

MONKEY

AMC Entertainment Holdings

BBBY

Bed bath and beyond

Random plays

A man discovers the missing $4.7 million check from Haribo and receives gummy bears.

The diver had a rare octopus hug.

Need to Know starts early and updates until the opening bell, but sign up here to get it delivered to your inbox once. The email version will be sent around 7:30 a.m. EST.

Listen to the Best New Ideas in Money podcast with MarketWatch journalist Charles Passy and economist Stephanie Kelton

#Markets #wakeup #call #Morgan #Stanley #offering #plan #investors #prepare

Leave a Comment

Your email address will not be published. Required fields are marked *