Morgan Stanley strategist says stock bulls face rude awakening

One of Wall Street’s most bearish strategists isn’t giving in to the bullish about-turn in equities, saying investors may be in for 'a rude awakening.'

Morgan Stanley’s Michael Wilson, whose outlook for a market slump in 2023 has yet to materialize, said fading fiscal support, lower liquidity and falling inflation will weigh on the U.S. equity rally in the second half of the year.

He’s also concerned that stocks are “as stretched as they can get” in a narrow performance that’s been driven by excess liquidity from March’s banking deposit bailouts.

“Given our fundamental view on growth, we find it hard to get on board with the current excitement,” Wilson wrote in a note Tuesday. “If second half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct. If not, many investors may be in for a rude awakening given the very big reach for risk we are seeing.”