Chief Morgan Stanley strategist predicts 10% market correction is 'highly likely' before presidential vote

A top Morgan Stanley executive warned Wall Street investors about a significant pullback in the stock market before November’s presidential election.

Mike Stanley, Morgan Stanleys Chief US Equity Strategist, pointed to uncertainty over the presidential campaign, corporate earnings and Federal Reserve policy.

I think the chance of a 10% correction is highly likely sometime between now and the election, Wilson said during an interview on Bloomberg Television on Monday.

Thats because uncertainty is going to prevail for a lot of different reasons.

He said investors can expect a choppy third quarter, though he acknowledged that is not unusual. 

His bearish prediction comes as the broad-based S&P 500 and the tech heavy Nasdaq continue to hit record highs — sparked by optimism over Fed cuts and the boom in artificial intelligence companies.

On Monday, the S&P 500 closed at a record 5,572.85, while the Nasdaq hit an all-time high of 18,403.74.

Wilson said the odds of stock prices closing the year higher than they are now is just 20% to 25%.

Were stuck in this sort of environment that really a lot of active managers dont like because its narrow, its hard to pick stocks again and its hard to outperform, Wilson said.

Goldman Sachs, JP Morgan Chase and Citigroup analysts have also forecast a slowdown, citing weakening economic data.

Wilson — who earlier this year lifted his target for the S&P 500 to 5,400 by mid-2025 from an initial prediction of 4,500 — said new growth is scarce.

Despite Wilsons warnings of a pullback, he said investors should not be too concerned because it could create opportunities to buy back into the market.

He suggested investors focus on individual stocks now as opposed to indexes.