In Search of a Bottom

Financology has been forecasting a 2022-2023 bear market in stocks at least since the beginning of 2021. Last week we again reiterated this view. This forecast was originally based only on Synthetic Systems, but as we noted three months ago, we’ve begun to see the fundamentals fall in place, in particular, the growing probability of a significant decline in corporate earnings:

“If I am right, analysts’ estimates of corporate earnings will decline sharply, likely in the coming quarter.”

This week Morgan Stanley’s Mike Wilson affirms this outlook with an exclamation point. An article by Sagarika Jaisinghani in ThinkAdvisor reports:

New Stock Market Low Coming in 2023: Morgan Stanley Strategist

Wilson thinks the consensus it still much too bullish, with his team is pegging next year’s S&P earnings as low as $180 per share, targeting an S&P low around 3000. Considering this would be a 16.66 multiple at bear market lows, Wilson might even be a little on the bullish side.

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