Stock market rally could be derailed by an earnings slump, Morgan Stanley warns

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Morgan Stanley analysts warned that the recent stock market rally could end this year as earnings per share for the benchmark index S&P 500 slide 16%.

TrendMacro Chief Investment Officer Don Luskin provides insight on the debt ceiling debate and the Fed's policies on 'Making Money.'over the past month is likely to fizzle out soon due to a slump in corporate earnings, according to Morgan Stanley. strong gains in the market

will not last for long as earnings per share for the benchmark S&P 500 tumble 16% this year amid slowing revenue growth and tight margins. "We think that the downside risk to U.S. earnings is now," the strategists, led by Andrew Sheets, wrote in the note. "While a deteriorating liquidity backdrop is likely to put downward pressure on equity valuations over the next three months, we also see EPS disappointment ahead as revenue growth slows and margins contract further.

The worse-than-expected earnings will send the S&P 500 spiraling, with the gauge ending the year at 3,900 – down more than 9% from Monday's open of 4,287.The gloomy forecast comes after a brutal year for the stock market, its worst since the 2008 financial crisis. All three indexes tumbled in 2022, snapping a three-year win streak. The Dow Jones Industrial Average ended the year down 8.8%, the best of the three. The S&P 500 sank 19.4% while the tech-heavy Nasdaq Composite plunged 33.

 

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