The US dollar ratcheting higher while the negative revisions for earnings appear set to accelerate to the downside. Thus, strategists at Morgan Stanley expect the S&P 500 Index to decline towards the 3,000 level.

Every 1% change in USD has a 0.5% impact on S&P 500 earnings growth

“On a year-over-year basis, the US dollar is now up 21% and still rising. Based on our analysis that every 1% change in the dollar has a 0.5% impact on S&P 500 earnings growth, fourth quarter S&P 500 earnings will face an approximate 10% headwind to growth all else equal.”

“The bear market in stocks will not be over until the S&P 500 reaches the range of our base and bear targets, i.e. 3,000 to 3,400 later this fall.”