Morgan Stanley Chief U.S. Equity Strategist Mike Wilson, who correctly termed this year′s sell-off, stated the marketplace has now “run out of steam” and reiterated his bearish wager on the S & P 500 . Wilson, a well known marketplace bear in 2022, expects the U.S. significant-cap index to tumble to the 3,000-3,300 stage by the first quarter of upcoming year. That would symbolize a additional-than 20% decline from its present-day stage of all-around 3,990 and is reduced than its mid-Oct trough. In a take note Dec. 12, Wilson acknowledged that his call is “out of consensus” and the bank’s bearish views “differ from several we discuss with.” At the commence of this 12 months, Wilson was an outlier in predicting a offer-off. His 12 months-conclusion focus on for the S & P 500 was 3,900, in comparison with an average forecast of 4,023, in accordance to a CNBC market strategist study . Wilson believes the drop in the sector this 12 months — with the S & P 500 down all-around 15% so significantly — has been largely driven by valuation compression as curiosity rates have risen. But the market’s subsequent fall will be dictated by a decrease in earnings, Wilson mentioned. The market’s “unwillingness to price the earnings risk” has observed the index rally as an alternative, he stated. It truly is up by 11.5% from mid-Oct. The bank believes this is partly mainly because buy-side analysts at institutional buyers, this sort of as pension resources and hedge resources, are not “bearish sufficient” on upcoming year’s earnings. The investment decision bank expects earnings per share (EPS) for the S & P 500 index to fall to $195 by the stop of next year. Having said that, according to FactSet consensus estimates, the EPS is at present forecast to rise to $230 in 2023 from $218 in 2022, highlighting Morgan Stanley’s markedly bearish phone. “We feel the driving forces at the rear of higher valuations are jogging out of steam,” Wilson and colleagues wrote. “We come across it pretty hard to argue for better valuations at this position, and with our expectation for slipping earnings estimates, that leaves tiny, if any, upside to broader equity marketplaces from listed here.” Indeed, the Wall Road huge stated it was now much more self-assured of its forecasts for an earnings economic downturn than ever. “As we have been highlighting for months, the element of our evaluation we are most confident about is our properly beneath consensus earnings forecast for future 12 months,” the analysts explained. — CNBC’s Yun Li and Michael Bloom contributed to this report.