Morgan Stanley’s Mike Wilson on bear market and the S&P 500

There has been much debate among market watchers over when this bear market will bottom, after a turbulent first half of the year for stocks. But Morgan Stanley’s chief investment officer believes that the end of this bear market will come “pretty quickly.” Mike Wilson, also the investment bank’s chief U.S. equity strategist, told CNBC on Friday that’s because the economic cycle has been “extraordinarily quick.” “The downturn itself, the V shaped recovery … and then the timing of the Fed and … peak employment. So we’re just ripping through this cycle, way faster than we’ve seen in prior cycles,” he told CNBC’s “Squawk Box Asia.” “And that’s good news. Because that means the conclusion of this bear market will come pretty quickly, you know, it’s going to be painful, but it’s going to be quick.” Read more Has the bear market hit the bottom? Goldman’s Oppenheimer delivers his verdict — and reveals where he sees ‘great opportunities’ Is the bear market coming to an end? Here’s one indicator pros say to watch closely Citi names its ‘highest conviction ideas’ for the second half of 2022 — and gives one upside of 85% Last month, the S & P 500 fell into a bear market — or 20% off recent highs hit in January — and remains there for now. The Nasdaq and Dow Jones Industrial Average have also slid, tumbling around 28% and 16% year-to-date, respectively. It comes after a rough first half of the year — the worst since 1970 — as recession fears and hot inflation caused investors to flee stocks. At what level will the S & P 500 trough? The S & P 500 closed at 3,863.16 on Friday — and Wilson says that if a recession occurs, the trough in the S & P 500 will likely be around the 3,000 level. In a soft landing scenario, however, in which a recession is avoided, he expects the bottom to come around 3,400. However, he stressed that the strong dollar poses a significant headwind to the index. “The S & P 500 is very levered to currency,” said Wilson. “Right now [the dollar is] up 17% year-over-year, and we think it could even go higher until the Fed pivots. So you’re looking at somewhere between 8% to 10% headwinds for S & P earnings growth.” He added that even if there’s no recession, there’s still “meaningful” downside earnings risk. “We’ve been more bearish on earnings and that’s really the differential,” Wilson said. Morgan Stanley is currently “very defensively oriented,” Wilson said, and overweight on healthcare, utilities and REITs.