The market ‘does not see a low yet’, says Morgan Stanleys Wilson after ‘ominous’ signal at the end of last week

‘Unfortunately, we just do not see the low point here yet. We are students in the market, we respect what the markets tell us. As we have said many times, the best strategist in the world is the internal parts of the stock market, and it has been telling us for months that growth is likely to slow. ‘

Mike Wilson, chief investment officer at Morgan Stanley, has proved bearish on targets in 2022. And the stock decline in April has probably not gone far enough to set the stage for a lasting recovery, he told CNBC on Monday.

It’s an environment that has seen defensive games – healthcare, real estate investment funds, utilities and such – perform “extremely well.” It has given some resilience to the S&P 500 SPX,
-1.12%,
which has stopped closing less than 11% during its record closing on January 3 on Friday, even though the average S&P 500 stock is in a bear market, defined as a decline of 20% or more from a recent high.

That may be due to changes, following a “rather ominous” performance for equities on Thursday and Friday, Wilson said, as defensive equities coincided with “deep” cyclical sectors, such as energy and materials, which had also experienced some extraordinary strength in recent trading. .

“And it tells me we’re heading into this final phase, and the good news is that we may finally be able to complete this bear market within the next month or so,” he said, adding that a withdrawal of 20% for the S&P 500 from its highest in early January just 4,800 would “somehow clear tires for us, we think, heading into the second half.”

A 20% drop from the S&P 500’s record close would bring it to 3,837.25, about 9.4% below its midday level on Monday. Shares fell, but fell outside the lows of the session, after a sharp sell-off on Friday, with the Dow Jones Industrial Average DJIA,
-0.84%
end almost 1,000 points lower and post its largest daily percentage decline since October 2020.

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