Morgan Stanley's outlook for S&P 500 index has taken a significant turn for worse

Analysts at Morgan Stanley are busy cutting profit forecasts for the top 500 companies in the US because of the risk of a serious economic downturn.

According to Bloomberg Intelligence, experts have significantly lowered their estimates for earnings per share (EPS) growth for the S&P 500 for the second quarter of the fiscal year. Estimates fell from 11.4% at the start of the year to 6.9% in April.

Morgan Stanley's Michael Wilson considers 5000–5500 points as a likely range for the S&P 500 Index. He believes this assumption will hold valid until recession fears are either confirmed or refuted by hard data. Employment reports are the most important data for market players. Last week, the index closed in the middle of this range, at approximately 5280 points.

US stock indexes have faced a sell-off this year as investors expect that Donald Trump's proposed tariffs will harm the economy while accelerating inflation. Investor sentiment is not optimistic, and thus traders are more likely to look for more opportunities outside the US. The MSCI World Index of Developed Countries, excluding the US, has gained more than 6% this year, whereas the S&P 500 Index has declined by 8.75%.