You Shouldn't Expect Big Stock Market Gains for Several Years, Morgan Stanley Says

By Ryan Vlastelica Sept. 12, 2018 11:34 a.m. ET

U.S. stock market investors hopefully enjoyed the sizable gains booked over the past several years, because it might be a while before they’re seen again.

That’s according to Morgan Stanley, the investment bank that has been notably cautious on Wall Street in 2018.

“We believe 2018 marks the beginning of a wide trading range that could last several years,” wrote Michael Wilson, the firm’s chief U.S. equity strategist.

He said the boundaries for the S&P 500 would be between 2,400 and 3,000, a range of 25%. The benchmark index currently sits near the middle of that range. It closed Tuesday at 2,887.89; based on that, the low end of Morgan Stanley’s range would represent a drop of 16.9% from its current level, while the high end would make for a gain of 3.9%. The firm’s “base case” price target for the S&P is 2,750, or down 4.8% from current levels.

“While the price damage may not be extreme at the index level, it may feel and look a lot like a bear market,” he said. “We think this ‘rolling bear market’ has already begun with peak valuations in December and peak sentiment in January.”

Read more: Why U.S. Stocks Rule the World

Wilson has been warning about U.S. stocks for months. In May, Morgan Stanley calculated that expectations for future returns were at an 11-year low, meaning they’re at their weakest level since before the financial crisis.

In July, he predicted that the market would see its largest correction in months, with the rally showing signs of “exhaustion.” In early August, he said the bull market—by some measures, the

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