Blockbuster earnings, which until now have played a pivotal role in fueling the stock market’s multiyear over the past few years, could be a distant memory as corporate profits hit a wall.
Mike Wilson, chief equity strategist at Morgan Stanley, on Monday downgraded S&P 500’s earnings-per-share growth target for the year to 1% from 4.3% and warned of a looming earnings recession.
“Our earnings recession call is playing out even faster than we expected,” said Wilson in a report. “When we made our call for a greater than 50% chance of an earnings recession this year, we thought it might take a bit longer for the evidence to build.”
The strategist, whose views on the stock market are among the more subdued in the industry, believes the odds of a contraction in corporation’s bottom line are rising with the possibility of flat earnings in the first half and a “hockey stick” for the second half.