Morgan Stanley thinks the S&P 500 will fall to a new low in 2022

The S&P 500 has now fallen sharply from its August highs. Morgan Stanley thinks U.S. stocks could hit a new low in the second half of the year.

The S&P 500 Index has experienced cycles of ups and downs several times this year. U.S. stocks entered 2022 on a good note after posting double-digit returns over the previous three years. What to expect from Tesla after hours stock price?

The S&P 500 also soared on the first trading day of the year and Apple’s market capitalization reached $3 trillion. U.S. stocks have since plummeted, and Saudi Aramco briefly surpassed Apple to become the largest company in the world by market capitalization.

Meanwhile, Warren Buffett was buying Apple stock in both the first and second quarters of 2022. Although the “Oracle of Omaha” was slow to buy stock in the second quarter, Berkshire Hathaway was nonetheless a net buyer of stock in the quarter.

Morgan Stanley predicts a new low for the S&P 500: What will happen to Tesla stock price predictions?

Analyst Mike Wilson thinks the S&P 500 could fall to 3,400 in the fourth quarter, down from its June low of 3,666 points. Notably, Wilson did not factor a recession into his forecast and predicts that the S&P 500 will fall to 3,000 if the U.S. economy goes into recession. Obviously, this is bad for Tesla stock price prediction.

U.S. inflation fell to 8.5% in July from 9.1% in June. However, this is still well above the U.S. Federal Reserve’s goals. While inflation is generally negative for stocks, some investing strategies can succeed in an inflationary environment.

Brokers remain bearish on U.S. stocks: how are NVDA pre-market stock prices doing?

Morgan Stanley is not the only brokerage firm that is bearish on U.S. stocks. Bank of America technical strategist Stephen Suttmeier said a head-and-shoulders pattern is forming in the index, which is a bearish indicator. Brokerage firms called the U.S. stock rally a typical bear market rally. Against this backdrop, NVDA pre-market stock prices are declining.

• Rob Ginsberg of Wolfe Research also predicted a further decline in the S&P 500. Notably, despite gains in July and early August, the S&P 500 didn’t move above its 200-day SMA (simple moving average). The index has been trading below its 200-day SMA since early April.
• The U.S. economy contracted in the first and second quarters of 2022. However, the NBER (National Bureau of Economic Research), which officially declares a U.S. recession, is looking at several other indicators, including personal spending and employment.
• While the Biden administration has tried again and again to play down recession fears, several brokerage firms, including Citi, have raised their chances of a recession amid high inflation and Fed rate hikes.

Federal Reserve to continue raising rates

The Fed faces difficult choices in managing both growth and inflation expectations. But time and time again, including at the Jackson Hole symposium last month, Fed Chairman Jerome Powell has clarified that controlling inflation is his top priority. Therefore, it makes sense to consider the current stock price of NVDA to buy.

Brokers expect the S&P 500 to fall further in the recession

UBS also lowered its year-end forecast for the S&P 500 from 4,150 to 4,000. Most brokerage firms expect the index to fall sharply in the event of a recession. Michael Berry, who correctly predicted a U.S. housing market crash in 2008, also sold all assets to his Scion Asset Management in the second quarter of 2022. He has only a small position in Geo Group stock.

Berry has long warned of a U.S. stock market crash. He said that while stock multiples have declined, a decline in earnings ratings will follow. By the way, in lowering its outlook for the S&P 500, UBS also lowered its 2022 EPS estimate for the index to $228 and its 2023 estimate to $235.