Investment bank Morgan Stanley predicts that there will be a “sudden contraction in corporate earnings in the US,” contradicting recent Wall Street estimates.
In contrast, the bank’s analysts are optimistic about the shares of Japanese, Taiwanese, and South Korean companies and recommend taking certain positions in developed market government bonds.
Morgan Stanley announced that earnings per share for companies from the S&P 500 index would fall by 16 per cent this year. That’s one of the most pessimistic forecasts among those tracked by Bloomberg and contrasts with pessimistic forecasts from Goldman Sachs, for example.
Analysts of the Morgan Stanley bank wrote that they believe that, at this moment, there is a danger of a decrease in the income of American companies. In the next three months, there will likely be a fall in the capital. Investors will be disappointed with earnings per share (EPS) as revenue growth slows and profit margins shrink.
S&P 500 and Possible Levels of Correction
Morgan Stanley forecasts S&P 500 earnings per share for S&P 500 companies to be $185, compared to strategists’ average forecast of $206. The bank believes that by the end of the year, the main index from Wall Street will lose more than 350 points and move to a level of around 3,900. It noted that the current values came to be after a somewhat surprising growth of 19.7 per cent compared to October. Hence, we should expect a certain level of correction.
If you’re looking for companies worth investing in the next medium-term period, Morgan Stanley lists to look for those that invest in artificial intelligence and manufacturers of weapons and military equipment.