According to a recent note by Morgan Stanley’s equity strategists, the current bear market is not over. The strategists predict that earnings will fall well below consensus expectations, with their base case for 2023 at $195. While they expect a stronger earnings picture in 2024, they have also identified potential cyclical and secular drivers of the next bull market in equities.
One of these drivers is more accommodative monetary policy as inflation slows. Another is a more stable starting point for consumer balance sheets, which could lead to pent-up demand in investment/capex and certain parts of consumer services. Additionally, a global growth recovery led by economies that have lagged since the pandemic could contribute to the next bull market, as well as the re-emergence of positive operating leverage.
Furthermore, the strategists cite the diffusion of Artificial Intelligence (AI) across sectors and the trend of reshoring as additional factors that could drive the next bull market in equities.
Morgan Stanley’s belief that quality outperforms in the long run is reflected in its “30 for 2025” list of companies, which includes Alphabet, Costco, JPMorgan, lululemon athletica, Mastercard, Microsoft, Nike, Visa, and others.
While Morgan Stanley’s outlook may be cautious, it is important to note that the stock market is inherently unpredictable, and it is impossible to know for certain what the future holds. As investors, it is important to carefully evaluate our own risk tolerance and investment goals before making any decisions, and to stay informed about the latest market trends and developments.