US stocks may fall further due to recession risks, according to strategists at Morgan Stanley and Goldman Sachs.
According to Arabiya Net, although this year's decline in US stocks has made their prices more equitable, the S&P 500 needs to cut an additional 15-20% to about 3,000 points, to fully reflect the size of the economic downturn, according to what strategists wrote in Morgan Stanley led by Michael Wilson in a note.
The bear market won't end until a recession hits or the risk is averted, strategists said after the benchmark index closed last week more than 20% below the record high set in January.
That view was echoed by peers at Goldman Sachs, who said stocks were priced in line with expectations of a mild recession, leaving it vulnerable to further downside expectations.
Investor sentiment over risky assets has been souring in recent weeks, as hyperinflation and tightening Federal Reserve policy raise the specter of a prolonged economic downturn. If a full-blown slump becomes the base case for the market, the S&P 500 could drop close to 2,900 points, said Wilson, a prominent Wall Street bear who predicted the market's recent sell-off.
Separately, Goldman Sachs strategists led by Peter Oppenheimer said they view the current bear market as cyclical, with stronger private sector balance sheets and negative real interest rates underpinning the systemic risks associated with structural bear markets.
