The recent rally in the US dollar creates an "unacceptable situation" for riskier assets, which could lead to a financial or economic crisis, Morgan Stanley strategists warned.
Sharp currency fluctuations are another pressure on the global economy and corporate earnings, which are expected to fall as the Federal Reserve's aggressive interest rate hike in the summer begins to take its toll on spending.
"The ultimate stock lows and yield highs are likely to be determined by the trajectory of earnings and economic growth, not inflation or the Fed," analysts, including Michael Wilson of Morgan Stanley, wrote.
The firm notifies the pressure from the dollar rally will help push the S&P 500 to a new bear market low between 3,000 and 3,400 by early 2023.