Bull market hasn't started, Fed pause could awaken bear: Morgan Stanley

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The latest rally isn't the start of a new bull market and a Fed pause on rate hikes this week could awaken the bear, Morgan Stanley CIO says

That turning point could happen as the Fed is expected to pause rate hikes at their policy meeting on Wednesday, which commentators have said would beThough a Fed pause is likely to move equities higher, the upside will be temporary, Wilson suggested, calling a potential pause in interest rates the"perfect book end" to the bear market rally.

"With the S&P 500 rally now crossing the 20% threshold, more are declaring the bear market officially over. We respectfully disagree due to our 2023 earnings forecast. Ironically, a Fed pause may awaken the bear tactically just as liquidity headwinds ramp up," Wilson said. Corporate profits will post a 16% decline this year, Morgan Stanley strategists predicted, before seeing a sharp 23% rebound in 2024.

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