Economists at Morgan Stanley believe the S&P 500 price earnings multiple will fall. Consequently, they arrive at a near-term overshoot of fair value of 3400 for the S&P 500.

12-month target for the S&P 500 is 3900

“While our 12-month target for the S&P 500 is 3900, we expect an overshoot to the downside this summer that could come sooner rather than later.”

“We think 3400 is a level that more accurately reflects the earnings risk in front of us, and expect that level to be achieved by the end of the second quarter earnings season, if not sooner.”