As Wall Street forecasters raised their optimism about the US stock market, Mike Wilson, Chief Investment Officer of Morgan Stanley, remained unmoved. He believed that given the general lack of growth in corporate profits, he had no reason to raise his expectations for the US stock market.
In the latest interview on Tuesday, he insisted on his prediction of a year-end target price of 4500 points for the S&P 500 index. More and more peers, including Bank of America, Goldman Sachs, and UBS, have raised their expectations for the index.
According to calculations, Wilson's forecast is about 15% lower than the closing price of the S&P 500 index at around 5175.27 points on Tuesday, and 5% lower than the average year-end forecast of Wall Street strategists tracked by Bloomberg at 4915 points. The only Wall Street strategist who is more pessimistic than Wilson is Marko Kolanovic from JPMorgan Chase, with a year-end target stock price of 4200 points.
"Due to the high P/E ratio, many people have raised their target prices," he said. "We are not willing to do so."
His suspicion was raised at a time when the US stock market has risen significantly since October last year. The S&P 500 index has risen for 16 out of the past 19 weeks as investors are enthusiastic about corporate financial reports, artificial intelligence, and economic strength. Previously, the inflation data released by the United States was stronger than expected, keeping market expectations for the Federal Reserve to cut interest rates at least three times before the end of the year unchanged.
Wall Street giants have pointed out that in the context of tightening monetary policy, American businesses and the economy have performed strongly. However, Wilson stated on Tuesday that the overall profit growth situation has not yet emerged.
The fourth quarter profit of S&P 500 index constituent companies increased by 7.4% year-on-year. According to data compiled by the media, excluding the "Technology Seven", the index's profits decreased by 1.7%.
"The risk of a hard landing has not been eliminated," he added. In recent years, this strategist has been one of Wall Street's most famous bears.
On the other hand, Wilson believes that the surge in investor speculation is a good reason to remain cautious about the future stock market. He emphasized that the trading boom of zero day options "0DTE" is evidence of intensified speculation. He pointed out that although this prosperity "may not necessarily end in tears", it does not mean that investors must chase the recent rebound.
"Our situation is that people face risks due to FOMO (fear of missing out). That's why we may be more cautious than some of our peers," he added.
Finally, Wilson stated that buying individual stocks is more meaningful than buying a broader index.