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Morgan Stanley continues to tout that market headwinds remain a bigger threat than the recent positive tailwinds Wall Street has seen. The investment bank also highlighted declining expectations that it sees in the S&P 500 as it's surveyed 2,000 individuals to gauge consumer sentiment and behaviors.
“There has been vigorous debate across varying topics affecting the markets at the moment. In our view, the headwinds significantly outweigh the tailwinds and we believe risks for a major correction have rarely been higher,” Morgan Stanley’s chief U.S. equity strategist Mike Wilson said on Monday.
Wilson went on to add: “Our view [is] that the S&P 500 is at risk of a near-term drawdown; our targets for the index are 3,900 for 4Q23 and 4,200 for 2Q24.”
Supporting the financial institution’s bearish outlook is some of the results that came from the recent survey of ~2,000 consumers in the U.S. that the firm conducted, which helps gauge consumer behavior, attitudes and outlook.
The survey highlighted that only 29% of consumers that have federal student loans feel positive that they will have enough capital to start making payments without altering spending in other areas.
Morgan Stanley also noted that consumers are more concerned about their payment obligations. The survey pointed to 31% versus the previous 28% number of consumers listed the inability to repay debts as their number one concern for the current year. Additionally, 27% compared to the previous 25% itemized the ability to pay rent/mortgage as a concern. The financial institution outlined that both metrics are reaching an all-time high.
Additionally, consumers are also looking to cut back on discretionary spending, with 61% of surveyed consumers stating that they will likely reduce spending over the next 6 months.
In the early aspect of Monday’s trading the S&P 500 (SP500) and its mirror tracking ETFs SPDR S&P 500 ETF Trust (NYSEARCA:SPY), Vanguard S&P 500 ETF (NYSEARCA:VOO), and the iShares Core S&P 500 ETF (NYSEARCA:IVV) have seen little movement with the index hovering near the 4,350 level.
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