Morgan Stanley’s strategist Michael Wilson offered a bearish outlook on U.S. stocks in a recent note sent to clients. According to Wilson, S&P 500 is headed towards 5% slump in the first part of 2025 amid growth risks.
Wilson, who serves as Chief U.S. Equity Strategist and Chief Investment Officer for Morgan Stanley, sees the S&P 500 tumbling down as low as 5,500 points in the near future. However, a turnaround in the second half of the year is likely and will put the S&P 500 on track to hit 6,500 by the end of 2025.
Wilson based his prediction on perceived lower fiscal spending and the effects that the recent tariff policy changes will have on corporate earnings. The S&P 500’s performance is expected to be volatile “as the market continues to contemplate these growth risks, which could get worse before they get better.”
The note also indicated that the S&P 500 could sink as much as 20% in case of recession, but that remains an unlikely scenario at the moment.
“We are not there, but things can change quickly and so it’s useful to know the downside in the bear case to manage one’s risk,” Wilson added.
S&P 500 plummeted by 3.32% last week, closing at 5,770.20 points. The benchmark index is down by 1.68% since the beginning of the year.