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He thinks that trend will continue, while investors are betting the trend will break and EPS revisions will start to get better. That hasn't bothered investors so far, but Wilson thinks it's going to grow to become a real problem. He notes that analysts are lowering their earnings forecasts for more companies and raising them for fewer lately. It's cut prices on home category products because sales have slowed and inventory is piling up. Stocks slipped after Target lowered its margin forecast again. "If earnings revisions don't reaccelerate (our view), we think the price remains wrong." We think both will happen over the course of 2Q/3Q earnings season," he said.
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"Either the price needs to come down to reflect the earnings risk or the estimates need to fall. But as those reports come in and companies cut their forecasts for the rest of the year, it's going to hit stocks hard. "Stocks can hang around current levels until 2Q earnings season when the next leg lower is likely to begin and end," Wilson wrote in a recent note to clients. On Tuesday Target slashed its profit margin outlook for the second time in three weeks. But in four to six weeks he thinks it'll become clear that company profits are weakening, and that will spell the end of anyĬompanies including Apple, Pfizer, Meta Platforms, and Microsoft have all recently warned that foreign currency fluctuations, including the very strong dollar, are affecting their respective businesses. Mike Wilson, chief US equity strategist and chief investment officer for Morgan Stanley, says stocks could build on their recent gains and even rise a bit further in the weeks ahead if Ukraine and Russia make progress in peace talks. But in a month, things might be different. You're probably not going to pay attention to this warning, according to Morgan Stanley.