- Morgan Stanley CIO Mike Wilson reiterated his bearish stock market view on Tuesday.
- Wilson cited “FOMO” trading activity among investors as reason to stay cautious on stocks.
- “We are seeing speculative activity pick up in a meaningful way,” Wilson said.
Morgan Stanley CIO Mike Wilson reiterated his bearish stock market view on Tuesday, telling Bloomberg Surveillance Radio that he’s seeing more signs of speculation among investors.
“We are seeing speculative activity pick up in a meaningful way,” Wilson said.
Wilson has a year-end S&P 500 price target of 4,500, representing potential downside of about 13% from current levels. The only Wall Street strategist more bearish than Wilson is JPMorgan’s Marko Kolanovic, who has a 4,200 year-end price target.
Wilson has held a bearish view on stocks for over a year,and admitted to Bloomberg that he was caught off guard by the 26% rally in stocks since their late-October low.
But the surge in speculation among investors, according to Wilson, is a good reason to stay cautious on the stock market going forward. Wilson highlighted the trading boom in daily expiration options as evidence of this heightened speculation.
“I would say the daily expiration option markets is probably your single best example of that. We have a lot of people sort of, you know, in the stock market its like prop bets, almost like DraftKings and things like that, that to me is signs that exuberance is pretty high,” Wilson said.
And while the exuberance “doesn’t have to end in tears,” it also doesn’t mean that investors have to chase the latest rally.
“We have a situation where people are reaching risk because there’s FOMO. That’s where the pendulum is right now. And that’s why we’re probably a little bit more cautious than some of our peers,” Wilson said.
Wilson’s bearish view on the stock market has been challenged not only by a stock market that’s sitting at record highs, but by peers on Wall Street who have been raising their price targets in recent weeks to play catch-up.
But Wilson is unfazed.
“I think a lot of folks, all they’ve done is raise their price targets based on higher multiples, and we’re not willing to do that because we don’t see the condition, we don’t see the justification for higher multiples given that we basically have no earnings growth across the broader economy, a situation that’s still kind of a difficult operating environment,” Wilson said.
With that, Wilson suggested that it makes more sense to buy individual stocks than it does to buy the broader index.
“We’re going to be very selective and that’s why we think you have to be a stock picker here, you can’t just buy the index,” Wilson said.
