Investment Expert Predicts 13% Downside In S&P 500 By Year-End With 4,500 Target: 'We Don't See The Justification For Higher Multiples'

Morgan Stanley’s Chief Investment Officer, Mike Wilson, reinforces his bearish stance on the stock market, citing apparent incipient speculation among investors.

What Happened: Wilson, in an interview with Bloomberg Surveillance Radio on Tuesday, noted a significant rise in speculative activities among investors.

With a year-end S&P 500 price target of 4,500, Wilson anticipates approximately a 13% potential downside from the present levels. His prediction is only surpassed in bearishness by JPMorgan’s Marko Kolanovic, who posits a 4,200 year-end price target.

Wilson identifies the trading boom in daily expiration options as an indicator of this escalated speculation. He equates the situation to prop betting in the stock market, indicative of high exuberance among investors.

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“I think a lot of folks, all they’ve done is raise their price targets based on higher multiples, and we’re not willing to do that because we don’t see the justification for higher multiples given that we basically have no earnings growth across the broader economy, a situation that’s still kind of a difficult operating environment,” Wilson stated.

Despite a stock market at record highs and increased price targets from Wall Street peers, Wilson remains steadfast in his bearish outlook.

Why It Matters: Wilson’s bearish outlook aligns with the warnings of other market experts. In February, Wall Street legend John Hussman predicted a dismal 12-year stock returns, cautioning that the current FOMO-fueled rally could lead to a decade or more of poor returns. This was further exemplified by the unexpected rise in inflation in February, which cast doubt on the likelihood of an interest rate cut by the end of the first half of the year.

On the other hand, the stock market has seen some remarkable performances. In February, Nvidia’s market capitalization crossed the $2 trillion mark, making it the fourth company to achieve this milestone.

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