Citation :
Morgan Stanley’s Chief Investment Officer Mike Wilson says investors should always be positioned for a market correction of 10%, a 20% correction, which is really more disruptive, where people might want to try and position for, the catalyst for that is going to be once again an ice scenario Wilson’s “ice scenario” envisions a sharp reversal of the post-lockdown “overconsumption binge,” which could slow the stronger earnings and operating leverage seen in S&P 500 companies as of late. “It would be natural that the mid-cycle transition ends up being worse than normal,” Wilson said Wilson added that historically, price-to-earnings ratios for the S&P 500 tend to fall by about 20% in a mid-cycle transition, pointing to 1994, 2004, and 2011 as examples. P/E ratios compare a company’s share price against its earnings per share, and have been elevated through the pandemic recovery. “The bottom line for us...is the risk reward is not particularly great at the index level from here, no matter what the outcome is. That’s why we don’t have any upside to the S&P for the rest of the year,” Wilson said.
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