The guy who successfully called the monster 2017 market rally and then topped that by forecasting a flat 2018 is not feeling great about 2019.
In a note to clients, Mike Wilson, the chief equity strategist at Morgan Stanley, said next year will bring “more of the same,” namely a blah market reminiscent of the current year’s performance.
The S&P 500 took heart Monday and advanced 1.55%, after getting pounded this month and falling into correction territory (down 10% from the last peak). A strong post-Thanksgiving retail surge powered the Monday rebound, along with word of higher oil prices.
For 2019, Wilson wrote, “we expect another range-bound year driven by disappointing earnings and a Fed that pauses.” He said the odds favor an earnings recession next year, with two quarters of negative growth for the S&P compared to year-prior periods.
The Federal Reserve is all but assured of hiking short-term rates a quarter percentage point in its December meeting. But the futures markets now project it will raise rates only twice next year, as opposed to the four increases originally expected. The reason: Fed wariness that it could harm the economy by being more aggressive—not an encouraging note for investors.
To Wilson, the US could be stuck with a “rolling bear market” for the next several years, meaning an S&P trading range of 2,400 to 3,000. The index closed Monday at 2,673.