Morgan Stanley Warns of Stock Market Drop Amid 3 ‘Clearing Events’: ‘Much of the Damage Already Done’

The stock market could be taking a massive drop — the worst since the Iran War earlier this year — according to investment bank Morgan Stanley.

An October 28 Business Insider story reported that the Wall Street bank has warned three “clearing events” could have a major effect on stocks.

Among those “events” are concerns over AI spending and costs, the midterm elections and overall tighter financial conditions.

Morgan Stanley warned of an 8 percent drop in the S&P 500, as the benchmark index could dip as low as 7,100. Right now, the bank sees the index ending the year at 8,000 — with their chief U.S. equity strategist Mike Wilson adding that stocks appear to be in the middle of a monthslong correction that began back in June.

“Bottom line: We think the correction that began in June is now in its final stages, with much of the damage already done beneath the surface,” Wilson wrote in a note to clients.

Currently, around 84 percent of S&P 500 stocks are already trading 10 percent below their recent highs.

Morgan Stanley predicted AI concerns would “come to a head” over the next couple weeks, while the bank added that the S&P 500 has typically gained 8% in the three months following midterms, which are happening now.

“The historical performance of equity markets post-midterms should provide investors with the extra confidence to step in should a quick downdraft arise,” they explained in the client note.

In an update on Monday, November 2, per Reuters, Wilson reiterated that the market correction which began in June now appears to be in its “final innings.”

However, speaking with Puck in September, Universa Investments founder Mark Spitznagel also said he believed the S&P 500 would top 8,000 with one “helluva rally” — before predicting that “it’s going to collapse 80 percent.”

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