US Equity Valuations At ‘Death Zone,’ S&P 500 Might Fall By 25 Percent: Morgan Stanley Strategist

US Equity Valuations At ‘Death Zone,’ S&P 500 Might Fall By 25 Percent: Morgan Stanley Strategist
Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York on Jan. 5, 2023. Andrew Kelly/Reuters
Naveen Athrappully
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Michael Wilson, chief U.S. equity strategist at Morgan Stanley, is warning that stocks are currently on the expensive side, with the risk-to-reward for equities “very poor” as he expects the S&P 500 index to tumble by 25 percent from current levels.

Wilson equated the current stock market valuations to a “death zone” in a note on Sunday, according to Business Insider. A death zone is a mountaineering term referring to altitudes beyond a certain point where the oxygen level is not sufficient to sustain human life for long. The sharp rally at the start of 2023 means that stocks are at their most expensive since 2007 by the measure of equity risk premium. They are now at a level Wilson calls the “death zone.”