Morgan Stanley apologizes for being bearish on stocks in 2023

In an unexpected turn of events, Morgan Stanley’s chief US equity strategist, Mike Wilson, issued a note to clients on July 24, acknowledging that he stayed overly bearish for too long this year.

Ultimately, the stock market proved him wrong, as the S&P 500 surged approximately 18 percent, outperforming historical averages.

Find out what Mike Wilson said to clients, his stance on the stock market moving forward, and his target for the S&P 500 for 2023 and 2024.

One Of Wall Streets Biggest Bears Admits He Was ‘Wrong’

In December of the previous year, the prevailing sentiment on Wall Street was that stocks were headed for a downturn in 2023.

While most experts shared this view, Morgan Stanley’s Mike Wilson emerged as one of the most vocal bears, predicting that the S&P 500 would decline to the range of 3,000 to 3,200.

However, the stock market defied Wilson’s bearish stance, and instead, the S&P 500 enjoyed robust growth, closing at 4,554 on July 24. This remarkable rally significantly surpassed the average annual return of 10% observed over the past three decades, leaving many investors pleasantly surprised.

Wilson Apologizes To Clients For Bearish Outlook

In the wake of the unexpected market surge, Wilson humbly apologized for his misjudgment in a note addressed to Morgan Stanley clients.

In his letter to clients, he acknowledged that the rally was marked by higher valuations than anticipated, primarily driven by falling inflation rates and cost-cutting measures.

The decline in inflation over the past year has been noteworthy, with June’s Consumer Price Index (CPI) indicating a 3% inflation growth compared to the previous year. In contrast, in June 2022, inflation had grown by a substantial 9.1%.

Wilson Remains Bearish on Stock Market, Despite Apology

Despite his admission of error, Wilson remains pessimistic about earnings in Q2 2023.

He believes that lower inflation may erode companies’ pricing power, potentially impacting earnings and setting the stage for market downside once more.