Morgan Stanley strategists led by Michael Wilson warn US equities are vulnerable to further energy-price gains and renewed bond-market volatility; in that scenario the S&P 500 could fall as much as 7%. They say S&P 500 valuations have dropped to their lowest since March over the past four months. Wilson adds that if financial conditions tighten further and/or energy prices jump, a deeper short-term valuation reset could push the S&P 500 to 7,100 points before a bull-market recovery toward year-e

Morgan Stanley strategists led by Michael Wilson warn US equities are vulnerable to further energy-price gains and renewed bond-market volatility; in that scenario the S&P 500 could fall as much as 7%. They say S&P 500 valuations have dropped to their lowest since March over the past four months. Wilson adds that if financial conditions tighten further and/or energy prices jump, a deeper short-term valuation reset could push the S&P 500 to 7,100 points before a bull-market recovery toward year-end; that level is about 7% below last Friday’s close. He expects volatility to rise into the November midterms but still projects a year-end rebound toward an 8,000-point target—roughly 5% above current levels—assuming strong corporate earnings.