The last corporate earnings recession didn't hurt stocks much, but Morgan Stanley says another one is coming and poses a bigger threat to the market.
His forecast stands in contrast to the rest of Wall Street, which has a consensus profit-growth estimate of 5.1%. Wilson says that optimism — as well as the confidence being exhibited by investors themselves — is being fueled by a flawed comparison to an earnings recession that occurred several years ago.earnings slipped into negative territory. And while investors certainly faced a handful of brief downturns, the end result was surprising: The market ultimately rose across the entire period.
"Fundamentally we retain a defensive bias and think that stock/sector selection are more fertile grounds for returns," Wilson said. "It is hard to outgrow GDP as earnings have done for the past two years without some payback," he said.
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