From peak to trough, the S&P 500 (SPX) fell 9% between January and March. Since then, the benchmark index has recovered most of its losses, with Morgan Stanley expecting more upside on the horizon.
Claim 30% Off TipRanks
New trading tool for QQQ bulls“Bottom line, our rebalancing thesis is starting to play out and underlies our more bullish view than most on where things will be in 6 months,” said Morgan Stanley Chief Investment Officer Mike Wilson.
Earnings Strength Supports Market Recovery, Says Wilson
Wilson cites strong earnings growth and discounted valuation multiples for “why this correction is largely over.” The S&P 500’s earnings multiple has slumped 18% since October, while Wilson expects the index to post 12% earnings growth during the first quarter. He also notes that the market is signaling that oil and gas prices have peaked and that demand destruction can lead to lower prices.
However, higher rates and increased bond volatility could pressure the market ahead of the “final phase of a correction.”