- One of Wall Street’s biggest bears believes the stock market could surge to record highs in 2024.
- Morgan Stanley’s Mike Wilson told CNBC on Tuesday that the stock market will survive its current earnings recession.
- “This is not the end of the world. This is not 2008. There’s not going to be a financial crisis,” Wilson said.
One of Wall Street’s most vocal bears expects the stock market to fully recover its losses and trade to record highs in 2024.
“This is not the end of the world. This is not 2008. There’s not going to be a financial crisis,” Morgan Stanley’s Mike Wilson told CNBC on Tuesday.
He has been consistently bearish on the stock market since late 2021 due to expectations that the Fed would have to aggressively hike interest rates to tame elevated inflation, ultimately leading to a decline in corporate earnings.
“Profitability is the question. Inflation increases your operating leverage and that cycle has turned down. We’ll get through it… This is just a good old-fashioned earnings recession because of the over-earning that we enjoyed during COVID,” Wilson said.
But the stock market should be able to manage all of those issues and eventually shake them off, according to Wilson.
While he still expects the S&P 500 to retest its mid-October lows and potentially even trade to the 3,000 level, which represents potential downside of 25%, he also expects an eventual recovery that investors should be prepared for.
“We’re not that pessimistic. We think it is a cyclical bear market… we’re believers in the future. We’re pretty constructive on the capital expenditure cycle. We think technology will continue to be a big part of the US economy. We think the redistribution of income and wealth will be a big driver of the consumer,” Wilson said.
All of that means the S&P 500 could trade above its prior record high of 4,800 within the next 18 months, probably sometime in 2024.
“We’re actually quite positive on 2024 and 2025 but we’ve still got to get through this valley,” Wilson said, adding that the current risk/reward profile for stocks is less favorable than it was just a few weeks ago.
“We’ve done a lot of good work. The valuations have come down for the really speculative stuff,” he said. “I think we could see new highs sometime probably next year if everything sort of plays out the way that we think.”