--- title: Why Analysts Are Predicting Another Stock Market Plunge description: What's next for the stock market? Analysts at Morgan Stanley issued a warning to investors this week. authors: - name: Sarah Hansen role: Senior Writer url: https://money.com/author/sarah-hansen/ bio: Sarah Hansen is a senior writer at Money covering all things personal finance. Previously, she covered economic policy and capital markets on the breaking news desk at Forbes. education: Northwestern University, New York University at_money_since: 2021 articles: 347 covers: - Investing - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Insurance - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes social: - https://www.linkedin.com/in/sarah-m-hansen/ former_staff: true editors: - name: Mallika Mitra role: Contributing Editor url: https://money.com/author/mallika-mitra/ bio: Mallika Mitra is a contributing editor for Money, based in Chicago. She has covered investing and retirement for seven years and her work has appeared in CNBC, Bloomberg, Kiplinger, AARP, Barron’s, Bankrate, The Daily Upside, ETF.com, The Bond Buyer, PLANADVISER, PLANSPONSOR and Investopedia. education: Craig Newmark Graduate School of Journalism at CUNY Kalamazoo College at_money_since: 2020 articles: 395 covers: - Investing - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - CNBC - Bloomberg - Kiplinger - Barron's - Bankrate - WGN-TV - CBS News Radio - This Morning With Gordon Deal - Everyone's Talkin' Money social: - https://twitter.com/mitra_mallika - https://www.linkedin.com/in/mallika-mitra-4577a386/ published: '2023-02-23T18:45:12.000Z' modified: '2024-01-10T17:50:38.000Z' section: Investing tags: - News - stocks word_count: 501 canonical: https://money.com/wall-street-analysts-warn-stocks-will-fall/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Two traders work on the floor of the New York Stock Exchange (](https://img.money.com/2023/02/News-2023-Stocks-Could-Fall.jpg) Stocks had a strong start to the year, but experts warn there could be more trouble ahead for investors. The [S&P 500](https://money.com/how-to-invest-in-sp500/) has had a rough week as of midday Thursday, with four back-to-back losing sessions. The benchmark index is still up about 4% since the beginning of January, but there’s no guarantee those gains will last. That's according to Morgan Stanley analysts. In a note to clients earlier this week, the analysts — led by Michael Wilson, chief equity strategist at the firm — warned that stocks have surged to unsustainable highs. Investors are increasingly bullish across the board despite the facts that stocks are “more expensive than at any time since 2007” and earnings expectations are 10% to 20% too high, the analysts wrote. That mismatch between the state of the market and investors' optimistic sentiment could lead to major losses in the months to come, especially given that the Federal Reserve could [raise interest rates](https://money.com/fed-interest-rate-hike-february-2023/) higher than expected and keep them there longer than expected, according to the analysts. The Fed raised interest rates throughout 2022 in an attempt to curb record-high inflation. Because higher interest rates make it more expensive for businesses and consumers to borrow and spend money, rate hikes tend to weigh on the price of financial assets like [stocks](https://money.com/how-to-buy-stocks/), [bonds](https://money.com/buying-bonds-great-investing-move/) and [crypto](https://money.com/what-is-cryptocurrency/) — an effect we certainly saw [reflected in the markets](https://money.com/investor-tips-after-stocks-worst-year/) in 2022. The central bank [most recently raised the federal funds rate](https://money.com/fed-interest-rate-hike-february-2023/) by 25 basis points. While that was a smaller increase than investors have grown accustomed to, [minutes](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20230201.pdf) from the meeting released this week indicate that Fed officials believe ongoing rate increases will likely be necessary to fight inflation. “Bottom line, investors are not bearish any longer,” the Morgan Stanley analysts wrote. “This is just another reason to be wary of the set-up going into what is likely to be another weak earnings season.” Wilson predicts that the S&P 500 could potentially fall to as low as 3,000 points in the first half of the year. That’s a drop of nearly 25% from its close at 3,991 points on Wednesday. ## Advice from Money Fluctuations in the stock market are normal, and no one has a crystal ball when it comes to stocks’ performance. That’s one reason why [financial advisors](https://money.com/how-to-choose-a-financial-advisor/) generally recommend deciding on a long-term investment strategy and sticking with it, even during periods when the market is down. In fact, periods in which prices are lower are actually a good time to invest, many experts say, since stocks are essentially on sale and you can benefit from the eventual recovery. They tend to recommend a strategy like dollar-cost averaging, which involves investing set amounts of money at regular intervals, to keep yourself from trying to time the market. [The Stock Market Is Rallying. Will It Last?](https://money.com/will-stock-market-rally-last/) [When Will the Stock Market Recover? Here’s What Experts Predict](https://money.com/when-will-the-stock-market-recover-heres-what-experts-predict/) [After a Strong Month for Stocks, Here's Where the Market Could Be Heading in February](https://money.com/where-stock-market-heading-february-2023/) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/wall-street-analysts-warn-stocks-will-fall/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Investing", "item": "https://money.com/investing/" }, { "@type": "ListItem", "position": 3, "name": "Stocks", "item": "https://money.com/stocks/" }, { "@type": "ListItem", "position": 4, "name": "Why Analysts Are Predicting Another Stock Market Plunge" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/wall-street-analysts-warn-stocks-will-fall/#webpage", "url": "https://money.com/wall-street-analysts-warn-stocks-will-fall/", "name": "Why Analysts Are Predicting Another Stock Market Plunge", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-02-23T18:45:12.000Z", "mainEntity": { "@id": "https://money.com/wall-street-analysts-warn-stocks-will-fall/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/wall-street-analysts-warn-stocks-will-fall/#breadcrumb" }, "dateModified": "2024-01-10T17:50:38.000Z" }, { "@type": "NewsArticle", "headline": "Why Analysts Are Predicting Another Stock Market Plunge", "articleSection": "Investing", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/02/News-2023-Stocks-Could-Fall.jpg", "width": 4368, "height": 2912, "caption": "News-2023-Stocks-Could-Fall" } ], "author": [ { "@type": "Person", "name": "Sarah Hansen", "url": "https://money.com/author/sarah-hansen/", "@id": "https://money.com/author/sarah-hansen/#author", "description": "Sarah Hansen is a senior writer at Money covering all things personal finance. 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