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Tags: stocks | market | shares | mike wilson | morgan stanley

Morgan Stanley's Mike Wilson: Stocks May Jump 8 Percent Before Plunge

(DreamsTime)

By    |   Thursday, 28 September 2017 03:44 PM EDT

A well-respected Morgan Stanley strategist says a bear market could start next year after a surge higher to cap the current bull run.

Morgan Stanley's Mike Wilson told CNBC that he expects the S&P 500 to reach 2,700 early next year, but there could be a “bear market” correction shortly after that.

"Today is a short term euphoria but we think this is the primary trend: Small caps, financials energy" are all investment opportunities, he said.

"That doesn't mean that FANG or tech gets left behind. They can both work in concert now. So I think this is the next leg."

A correction, which could start in the second half of next year, could take the S&P 500 down 20 percent, said Wilson, Morgan's chief equity strategist.

Wilson also sees the potential for a pullback of 5 percent to 6 percent this fall.

"I think the way it sets up is people probably get excited over the next couple of weeks," about Trump’s tax deal, said Wilson, also chief investment officer of institutional securities and wealth management.

"Then we're going to have the inevitable disappointment."

Wall Street edged higher on Thursday, with the S&P 500 poised to close at a record on gains in McDonald’s and healthcare names, while investors continued to hope President Donald Trump will be able to make progress on tax reform.

But gains were tempered with equities at record highs and valuations elevated, Reuters explained. 

The forward price-to-earnings ratio (P/E) on the S&P stood at 17.9 compared with its long-term average of 15.1 while the forward P/E on the Russell is 26.3 against an average of 21.3.

“The market is doing what it has been doing a lot of this year, it doesn’t surge to new levels, it just crawls to new levels,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

“People are comfortable owning stocks, but for us, these valuations are pretty stretched, especially for something like smallcaps.”

U.S. Treasury Secretary Steven Mnuchin said Trump’s proposal for a cut in the corporate income tax rate to 20 percent was “not negotiable.”

The plan, which called for tax cuts for most Americans, also drew criticism for favoring business and the rich and potentially adding trillions of dollars to the deficit.

(Newsmax wires services contributed to this report).

© 2024 Newsmax Finance. All rights reserved.


InvestingAnalysis
A well-respected Morgan Stanley strategist says a bear market could start next year after a surge higher to cap the current bull run.
stocks, market, shares, mike wilson, morgan stanley
388
2017-44-28
Thursday, 28 September 2017 03:44 PM
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