Morgan Stanley, one of the most prominent banks on Wall Street, is telling clients that U.S. stocks are going down in 2022.
Specifically, their 12-month price target for the S&P 500 is 4,400. That’s about 6% below where the index closed on Friday.
“We think that 2022 is really about ‘mid to late-cycle’ challenges: better growth squaring off against high valuations, tightening policy, rambunctious investor activity and inflation being higher than most investors are used to,” Morgan Stanley strategists, led by Andrew Sheets, wrote Sunday (via Bloomberg). “We see plenty of challenges, including downside to the S&P 500 and U.S. 10-year yields being well above forwards.”
It’s unsettling stuff. What’s an investor to do?
I certainly don’t think it’s necessary to ignore these headlines. Investors would be fooling themselves if they don’t think stocks can do poorly in the near-term.
In fact, long-term investors might find themselves relieved to see the stock market fall only 6% over the next 12 months.