Morgan Stanley's chief U.S equity strategist suggests that the bear market many investors are watching out for has already begun and will last through the end of 2019.
"Every sector has gone down at least 11 or 12 percent at least once this year. Some were down 18, 19, 20 percent," said Morgan Stanley's Mike Wilson in an interview with CNBC on Thursday.
'Rolling Bear Market' Is 'Fooling Everyone at the Index Level'
Wilson said this "rolling bear market" is "fooling everybody at the index level" and added that "there's a lot of pain out there." The strategist highlighted cyclical stocks such as staples, homebuilders and many semiconductor names as among the hardest hit.
In a recent Investopedia story, Mark Kolakowski outlined a lengthy report released by Wilson and his team which highlighted long-term stock picks for a choppier market based on sustainability and quality of business model. These included Activision Blizzard Inc. (ATVI), JPMorgan Cash & Co. (JPM) and Constellation Brands Inc. (STZ).
(For more, see also: 8 Stocks to Outperform a 'Rolling Bear Market'.)
Wilson added, "A bear market to me doesn't [necessarily] mean the market has to go down 20 percent." The classical definition of a bear market requires that stocks fall at least 20%.
"A bear market is a tougher environment, it's hard to make money. Volatility is a lot higher, so I don't care what kind of portfolio you're running, you can't run as much risk anymore, you just can't do it."
Wilson's forecasts imply a meager 1% gain of the S&P 500 to 2,750 by year-end, the most bearish of all the 18 strategists followed by CNBC. Most investors say that we are in the ninth year of a bull market, and while concerns over a looming crash have increased lately, many do not see a bear market coming until 2019 or 2020.
Wilson isn't alone, however. Mark Mobius, co-founder of Mobius Capital Partners, foresees a 30% correction as a "quite possible," viewing a crash as a result of massive outflows from exchange-traded funds (ETFs). Other analysts with forecasts of 2,850 or less for the S&P 500 include Goldman Sachs' David Kostin, Citigroup's Tobias Levkovich, Wells Fargo's Scott Wren, and BNY Mellon Wealth Management's Jeff Mortimer.