Market “doesn’t see a bottom yet,” says Morgan Stanley’s Wilson after “ominous” signal late last week

‘Unfortunately, we are not yet seeing the minimum here. We are market scholars, we respect what the markets tell us. As we have said many times, the best strategist in the world is inside the stock market and he has been telling us for months that growth is likely to slow.

Mike Wilson, chief investment officer at Morgan Stanley, appears bearish on the 2022 target. And the stock’s April slide likely hasn’t gone far enough to set the stage for a lasting rally, he told CNBC on Monday.

It’s an environment where defensive plays — healthcare, real estate mutual funds, utilities, and so on — work “extremely well.” That has provided some resilience to the S&P 500 SPX,
which has held to close less than 11% below its record close on Friday, Jan. 3, even as the average S&P 500 stock is in a bear market, defined as down 20% or more from a recent peak .

That may be due to the turnaround, after a “pretty ominous” performance for stocks on Thursday and Friday, Wilson said, when defensive stocks fell alongside “deep” cyclical sectors such as energy and materials that had also seen strength. extraordinary in recent trade. .

“And that tells me that we’re getting into this final phase, and the good news, the silver lining … is that maybe we can finally complete this bear market over the next month or so,” he said, adding that a pullback A 20% rise for the S&P 500 from its early January high just shy of 4,800 “would clear the decks for us, we think, heading into the second half.”

A 20% drop from the S&P 500’s record close would take it to 3,837.25, about 9.4% below its midday level on Monday. Stocks were lower, but off session lows, after a sharp sell-off on Friday that saw the Dow Jones Industrial Average DJIA,
it ends nearly 1,000 points lower and posts its biggest daily percentage drop since October 2020.

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