Economists at Morgan Stranley expect price declines for equities. The S&P 500 Index could fall to the 3000 level.

Have markets fully priced an earnings decline?

“We are feeling more confident about our 2023 forecast for S&P 500 earnings per share of $195. This remains well below both the bottoms up consensus of $231 and the top down forecasts of $215.”

“The consensus view on the buy side is now that we won't make new lows on the S&P 500 next year, but will instead defend the October levels or the 200 week moving average, approximately 3500 to 3600 on the S&P 500.”

“We remain decidedly in the 3000 to 3300 camp with a bias toward the low end given our view on earnings.”

“With the year end Santa Claus rally now fading, there is reason to believe the decline from last week is the beginning of the move lower into the first quarter for stocks that we've been expecting, and when a more sustainable low is likely to be made.”