These Stocks Could Outperform in Second Half of 2022 - Morgan Stanley's Wilson

© Reuters. These Stocks Could Outperform in Second Half of 2022 - Morgan Stanley's Wilson

By Senad Karaahmetovic

Morgan Stanleys top equity strategist Michael Wilson has once again warned investors that the economic slowdown is worse than previously expected.

The strategist reiterated his view that the bear market wont be completed until earnings estimates are cut to more reasonable levels. There has been some progress on this front in recent weeks as the S&P equity risk premium has also risen to 340bps, closer to our fair value level of 370bps.

Still, Wilson reminds investors that the S&P 500 and Nasdaq 100 forward earnings estimates are both 20%+ above the post-GFC trend.

On how to position after a brutal first half of the year, Wilson has reiterated his bullish stance on companies that can yield earnings stability.

An industry level earnings risk heat map developed by Morgan Stanley signals that defensive industries (Telecom, Utilities, Insurance, Real Estate, parts of Staples and Healthcare) screen relatively well when assessed on this basis. Meanwhile, we find that cyclical tech groups (Tech Hardware and Semis) screen as having higher risk on this basis.