US stocks at risk of another 5% dip, Morgan Stanley warns
US stocks are at risk of falling by an additional 5%, with concerns growing over the impact of tariffs on corporate earnings and reduced fiscal spending, according to Morgan Stanley strategist Michael Wilson.
The strategist — among the popular bearish voices on equities until mid-2024 — said he expects the S&P 500 (^GSPC) to hit a low of about 5,500 points in the first half of the year, before recovering to 6,500 by end-2025, News.Az reports, citing Bloomberg.
His year-end target implies a rally of 13% from current levels, although “the path is likely to be volatile as the market continues to contemplate these growth risks, which could get worse before they get better,” Wilson wrote in a note.
The strategist warned the benchmark could sink 20% in the likelihood of a recession. “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 said.
US stocks have trailed international peers this year as valuation concerns hit the technology heavyweights, which had led the S&P’s rally in the past two years. President Donald Trump’s shifting stance on tariffs has also sowed confusion, while US earnings revisions have been consistently downgraded since end-2024.
Wilson said seasonal patterns suggest earnings revisions as well as the S&P 500’s performance could both improve over the next few weeks.
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