Morgan Stanley: S&P 500 may collapse to 3,900 points by the end of the year

Analysts at investment bank Morgan Stanley believe that corporate profits of companies will fall by 16% in 2023. This will somewhat slow down the rally in the US stock market and lead to a decline in the S&P 500 broad market index to 3,900 points by the end of the year. And this is almost 9% lower compared to Friday's close (4,282.37 points).

Experts believe that there are currently risks of income decline in the United States. In addition to the fact that the deterioration of the liquidity situation will put pressure on stock valuations over the next three months, analysts also expect disappointing earnings per share (EPS) amid slowing revenue growth and further margin reduction.

Morgan Stanley expects S&P 500 earnings per share to be $185 versus consensus of $206. Against this background, the bank's analysts advise to take a closer look at the shares of companies in the protective sectors of the economy and investment-grade bonds of developed markets.

In addition to this, experts express an optimistic opinion about the shares of Japan, Taiwan and South Korea. They also recommend that investors include in their portfolio a significant share of government bonds of developed markets, including long-term US Treasury bonds, as well as dollars.