Investors may be surprised how low the S&P 500 could go in a recession, Morgan Stanley says
The S & P 500 may have quite a bit further to fall this year, especially if the U.S. is pushed into a recession, according to Morgan Stanley. Right now, the 2023 consensus for the stock market is that the S & P 500 will fall in the first half, reaching somewhere between 3,500 to 3,600 in a mild recession, then rally in the second half of the year.
" He sees the equity risk premium of the S & P 500 – currently around 2.33% –too low given the earnings risk forecast. In 2008, the equity risk premium reached 7%, a level not unthinkable if another financial disaster were to occur. This year, an equity risk premium of about 4% is probably more likely, and Wilson thinks the figure will rise another 2% to 2.5% from current levels.
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