Morgan Stanley’s Chief U.S. Equity Strategist Mike Wilson says we’re nearing the end of the bear market, but things could remain challenging for a while longer. “I think we’re in the final stages, but the final stages can be very challenging, right?” he told CNBC’s “Street Signs Asia” on Friday. “Now it’s a more of a two-way risk. And I think we’re going to be in that two-way risk probably until the year end.” He added: “The final move of the bear market probably comes next year in the first quarter, when the earnings finally catch up to where we think they’re going to be next year.” Markets have certainly had a volatile year, with a number of bear market rallies raising — and dashing — hopes. Investors have been watching U.S. Federal Reserve comments closely for hints on when it could pause tightening, given its ongoing battle against inflation. Figures earlier this month showed that prices were rising less than expected , sending stocks higher on anticipation that a peak in inflation could be in sight. When the S & P 500 will hit a ‘new low’ Wilson said the S & P 500 will “probably make a new low” sometime in the first quarter of next year, adding that the “low 3000s is a really good range to think about for the low for this bear market.” The index closed at 3,946 Thursday, down around 17% year-to-date, after clawing back some losses in October. “That [new low] will be a terrific buying opportunity because by the time we get to the end of next year, we’ll be looking at 2024 when the earnings will actually be accelerating again,” he said In the bank’s U.S. equities outlook for next year , Wilson said he expects the S & P 500 to slide to between 3,000 and 3,300 in the first three months of the year. He also told CNBC that earnings expectations for next year are about 20% too high. “If things slow down and inflation comes down, the pressure on margins is going to be extraordinary,” he said.
