Morgan Stanley's Michael Wilson believes the stock market is entering a destructive phase.
"The Nasdaq could correct by 15 percent plus, the S&P 500 probably goes down about 10 [percent]," the firm's chief U.S. equity strategist said Thursday.
His comments came on CNBC's "Trading Nation," where he was speaking publicly on Monday's correction warning research note for the first time. Wilson contends financial conditions are tightening more than most investors appreciate, and a correction has already started.
"The market has just been getting narrower and narrower. So what we've seen is every sector within the S&P has gone through about a 20 percent correction on valuation except for two: technology and consumer discretionary �� basically growth stocks," Wilson said. "Our view is that this rolling bear market has to complete itself by hitting those two sectors, and we think that's actually begun."
Wilson, who was one of last year's biggest bulls, sees this shift from growth to value stocks creating a lot of trouble because technology and consumer discretionary groups make up nearly half the S&P.
"If the growth stocks get hit disproportionately hard, it's going to be very difficult for that money to leak into other parts of the market without having some loss of value," he said.
Wilson's S&P year-end target is 2,750 �� 4 percent below the index's record high of 2,872 hit on Jan. 26 and about 3 percent from current levels.
As for next year, he doesn't see the situation getting much better.
"There are definitely a lot of signs already that there's a view that things are going to slow materially next year whether there is a recession or not," Wilson said. "
However, he isn't bailing on stocks altogether. Wilson likes energy, utilities, industrials and financials as a rotation from growth to value picks up steam.
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A ‘rolling bear market’ is already claiming victims, Mike Wilson goes into correction mode 18 Hours Ago | 04:57 Disclaimer
Media coverage about Miller Industries (NYSE:MLR) has been trending somewhat negative this week, Accern Sentiment reports. The research firm ranks the sentiment of news coverage by analyzing more than twenty million blog and news sources in real-time. Accern ranks coverage of publicly-traded companies on a scale of negative one to one, with scores nearest to one being the most favorable. Miller Industries earned a daily sentiment score of -0.09 on Accern’s scale. Accern also assigned news headlines about the auto parts company an impact score of 46.4626409572006 out of 100, meaning that recent news coverage is somewhat unlikely to have an effect on the stock’s share price in the next few days.