'Highly possible' 10% correction for the S&P 500, according to Morgan Stanley

According to Morgan Stanley's Mike Wilson, in an interview with Bloomberg, traders should brace themselves for a drop in the stock market because of the uncertainty surrounding the US presidential campaign, corporate earnings, and Federal Reserve policies.

Wilson stated that the third quarter is "going to be choppy" and that he believes "the chance of a 10% correction is highly likely sometime between now and the election" in an interview with Bloomberg Television.

After a 24% spike in 2023, the S&P 500 has increased by 17% this year because of the expectation that the Fed would cut rates twice this year and the excitement surrounding artificial intelligence. Even veteran bear Wilson has changed his position over the last many years.

Wilson did, however, inform Bloomberg that "your likelihood of upside from now until year-end is very low, much lower than normal." He estimated that there is a 20% to 25% possibility that stock prices would end the year higher than they are currently.

Wilson isn't very worried about a retreat, even this. Rather, he stated that it may present chances for investors to purchase as the current values are "unexciting" in light of the S&P 500's double-digit increase this year.

He thinks that individual equities are now a better method to invest in the stock market than indexes, and he and his team will keep recommending quality growth names as well as quality in general.

Wilson observes that although he believes the trend will continue, locating inexpensive shares in those areas is a challenge. "If they were to come in 10%, then we'd probably get interested again," he stated in the interview.

(Sources: bloomberg.com, investing.com, reuters.com)