Morgan Stanley chief US equity strategist Michael Wilson has forecasted that investors may suffer more in 2023 with a looming recession leading to the S&P 500 falling as low as 3,000 points, which is more than 20% from its current trading level of around 3,900 points. The main reason for the bearish forecast is that US corporate profits are expected to slump as the economy slows and possibly enters a recession. Such a steep decline in stocks would likely result in trillions of additional losses on top of last year’s hit to household wealth, impacting millions of workers who are saving for retirement as well as investment funds for pensions, universities, and other institutions. He also noted that this forecast could put more pressure on stocks because investors generally pay less for companies when their profits erode, comparing the current situation to August 2008, when the Great Recession started. They made reference to that timeframe and the widening gap between earnings and pricing by saying, “that may cause more than a twinge of concern for investors given that 2008 marked the start of the Great Recession. The S&P 500 plunged about 37% that year, although the index regained its footing in 2009, when returns jumped by double-digits, and continued to rise for the rest of the decade.”
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