Investment bank Morgan Stanley predicts a “sudden contraction in corporate earnings in the US,” contradicting recent Wall Street estimates.
In contrast, the bank’s analysts are optimistic about Japanese, Taiwanese, and South Korean company shares and recommend positions in developed market government bonds.
Morgan Stanley forecasts a 16 percent decline in earnings per share for companies in the S&P 500 index this year. This is one of the most negative predictions among those monitored by Bloomberg, contrasting with optimistic forecasts from institutions like Goldman Sachs.
Morgan Stanley analysts express concern about a potential decrease in American companies’ income, expecting a decline in capital and disappointing earnings per share (EPS) due to slowing revenue growth and shrinking profit margins.
Correction levels anticipated
Morgan Stanley predicts S&P 500 earnings per share of $185, compared to the average forecast of $206 by strategists. The bank believes the main Wall Street index will lose over 350 points and settle around 3,900 by year-end. They note that current values reflect a surprising 19.7 percent growth since October, indicating an expected correction.
MS identifies artificial intelligence companies and manufacturers of weapons and military equipment as worthwhile investments in the medium term.