News: Wall Street most notorious bear sees a stocks market rally coming
News: Wall Street most notorious bear sees a stocks market rally coming
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One of Wall Street most prominent bears expects the current rally in U.S. stocks to extend before the sell-off resumes.

Morgan Stanley strategists led by Michael Wilson said the S&P 500 could gain another 5% to 7% before turning around again.

“We believe U.S. stocks can continue to rise,” they wrote in a note, as falling bond yields and oil prices eased some fears of runaway inflation and helped the benchmark endure a three-week losing streak.

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U.S. stocks have been hit this year on concerns that tightening Fed policy and rising inflation could push the economy into recession. The S&P 500 entered a bear market after falling 20% ​​from its January peak and is on track for its worst first half since 1970.

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Wilson, who correctly predicted this year’s selloff, said the retracement of a 38% to 50% drop across the board “would not be unnatural or inconsistent with previous bear market rallies.” That would lift the S&P 500 to 4,200, putting the index up about 5% to 7% since Friday’s close, while interest-rate-sensitive stocks would fuel the recovery, he said.

But Wilson warned that stocks will eventually face further losses due to fears of a slowing economy leading to lower oil and yields, rather than peaking inflation.

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“The bear market may not be over yet, although it may feel that way in the coming weeks as the market sees lower rates as a sign that the Fed can plot a soft landing and avoid a major earnings forecast revision,” he said.

In his base case for a soft landing for the economy, Wilson sees the S&P 500 bottoming out between 3,400 and 3,500 index points, 13% below its last close. A recession would drop the index more than 23% to about 3,000, he said.

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