Market “doesn’t see a bottom yet,” says Morgan Stanley’s Wilson after “ominous” signal late last week

‘Unfortunately, we are not yet seeing the minimum here. We are market scholars, we respect what the markets tell us. As we have said many times, the best strategist in the world is inside the stock market and he has been telling us for months that growth is likely to slow.

Mike Wilson, chief investment officer at Morgan Stanley, seems bearish on the 2022 target. And the stock’s fall in April likely hasn’t gone far enough to set the stage for a lasting rally, he told CNBC on Monday.

It’s an environment that has seen defensive games — healthcare, real estate investment trusts, utilities and the like — perform “extremely well.” That has provided some resilience to the S&P 500 SPX,
+2.58%,
which has held to close less than 11% below its record close on Friday, Jan. 3, even as the average S&P 500 stock is in a bear market, defined as down 20% or more from a recent peak .

That may be due to the turnaround, after a “pretty ominous” performance for stocks on Thursday and Friday, Wilson said, when defensive stocks fell alongside “deep” cyclical sectors such as energy and materials, which had also seen a extraordinary strength in recent trade. .

“And that tells me that we are entering this final phase, where the good news, the silver lining … is that maybe we can finally complete this bear market over the next month or so,” he said, adding that a pullback of 20% for the S&P 500 from its early January high just shy of 4,800 “would clear the decks for us, we think, heading into the second half.”

A 20% drop from the S&P 500’s record close would take it to 3,837.25, about 9.4% below its midday level on Monday. Stocks were down, but off session lows, after a sharp sell-off on Friday that saw the Dow Jones Industrial Average DJIA,
+1.95%
it ends nearly 1,000 points lower and posts its biggest daily percentage drop since October 2020.

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