Morgan Stanley sees slump in US earnings in 2023, sharp rebound next year
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 30, 2023. REUTERS/Brendan McDermid
(Reuters) - Morgan Stanley warns of a 16% drop in profit for S&P 500 companies this year, followed by a sharp rebound in 2024 when analysts say the Federal Reserve's policy will become more accommodative.
Strategists led by Michael Wilson said in a note on Monday that they expect earnings to rebound sharply, with a 23% jump next year.
The Wall Street bank warned that the EPS of S&P companies could slip to $185 from $195 in 2023 before recovering to $239 next year.
"The boom/bust period that began in 2020 is currently in the bust part of the earnings cycle — a dynamic that's not yet priced," Wilson said.
Morgan Stanley predicted the index to rebound to 4,200 levels in 2024 while keeping its 2023-end target unchanged at 3,900. The index closed at 4,282.37 on Friday.
A slew of positive news, with expectations of a Fed pivot, persistent improvement in liquidity, and AI-related tailwinds to mega-cap names such as Nvidia Corp, have buoyed indexes so far, Morgan Stanley said. Such factors have held back a correction in markets, the bank added.
(Reporting by Roshan Abraham in Bengaluru; Editing by Dhanya Ann Thoppil)
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