Morgan Stanley look ahead to the balance of 2022 for the stock market:
- Earnings are the bigger risk for stocks from here
- Almost all of the weakness for stocks during 1H22 was due to the Fed and tighter financial conditions. The 2H outcome will ultimately be determined by earnings expectations for next year, in our view. As a result, equity investors should be laser focused on this risk, not the Fed, particularly as we enter the seasonally weakest time of the year for earnings revisions, and inflation further eats into margins and demand.
- Leading earnings indicators point to weakness ahead
