Goldman Sachs Bear Wilson: US stock risks have never been higher

Wall Street bear and Morgan Stanley strategist Michael Wilson warned that the prosperity of the US stock market is just an illusion, and the market is facing a rare risk of a significant pullback.

On Monday, local time, Wilson stated in a report that there is a risk of a short-term decline in the S&P 500 index, which is expected to drop to 3,900 points by the end of the year, about 10% lower than the overnight closing price of 4,328 points, and then rebound to 4,200 points in the second quarter of next year.

He wrote in the report:

"The bearish factors far outweigh the bullish factors, and we believe that the risk of a major adjustment is rarely so high."

Wilson believes that the US stock market mainly faces two major bearish factors: 1) The earnings prospects of US stocks are lower than the market consensus; 2) Liquidity is deteriorating.

He predicts that the EPS of the S&P 500 this year will be $185 per share, while the average expectation on Wall Street is $220 per share.

Wilson wrote:

"Although last year's earnings fell short of expectations mainly due to the cost structure expansion caused by the normalization of demand after the epidemic, we believe that the next step will be a deterioration in stock pricing and revenue lower than expected."

In addition, Wilson also stated that due to the record issuance of national debt and the level of QT, the liquidity of the US stock market has also begun to deteriorate, and bank reserves will decrease by 500-800 billion US dollars in the next 6 months, which may have a negative impact on stock valuations:

"In the past 12 months, fiscal support has been much higher than most investors understand. It is expected to peak next month and reverse, and may have a 6% adverse impact on nominal GDP in the next 12 months."

He said that as investors turn to defensive industries, the performance of value stocks will surpass that of growth stocks.

Since the end of last year, Wilson has been insisting on making doomsday remarks and shorting the US stock market, but his predictions have not yet been fulfilled.

The S&P 500 index rebounded to a high since April last year at the beginning of this month, and then continued to fluctuate slightly downward. According to some market analysts, the main reason for the decline is the concern about the US economic recession, and the impact of monetary policy has been much smaller.

The financial blog zerohedge joked that Michael Wilson warns in his report every day that the market is about to fall, but as the Federal Reserve approaches interest rate cuts and/or launches new QE day by day, the S&P 500 may set a new historical high in his doomsday remarks.