Morgan Stanley's pessimistic outlook for US equities

According to Morgan Stanley's Michael Wilson, US stocks are heading for a bumpy end to the year after a rally in November, with bond yields fluctuating.

With the S&P 500 up nearly 20% this year but remaining broadly bearish, Wilson said December could bring "near-term volatility in both rates and equities" before more constructive seasonal trends as well as the so-called "January effect" support stocks next month.

Wilson said that although investors have priced in a Fed pivot several times in the past year, this time they are showing "the most support" as they expect it to play out "still on a healthy macro backdrop". This scenario "would be the most bullish outcome for equities," the strategist wrote.

Bank of America Corp, Deutsche Bank Group AG and RBC Capital Markets are forecasting a record rise for the S&P 500. Wilson is still broadly neutral for the year as he expects the index to end 2024 around 4,500 points, about 2% below current levels.