Wall Street's chief bull and bear now agree on one thing: any stock market correction next year will likely be a moderate pullback, rather than a dramatic plunge.
Morgan Stanley strategists led by Michael Wilson said Monday that they are now more confident that the S&P 500 index will drop about 6.6% by the end of 2022 to 4,400 points.
While this is among the most pessimistic Wall Street estimates for next year tracked by Bloomberg, it's far from predicting a bear market.
Over at Goldman Sachs Group Inc., strategists reiterated their forecast that stocks will continue advancing next year, although at a "slower pace." They too, however, said that a small retreat is likely in the cards.
"While these levels do not tell us that a bear market is imminent, they do imply higher risks of a correction and more vulnerability to disappointments (growth or interest rate driven)," the strategists led by Peter Oppenheimer wrote in a note.
Current index levels, they said, indicate low single-digit returns over 12 months with a maximum drop between 5 and 10%.
Equities have been resilient to tapering and omicron risks, with the S&P 500 surging to a record high on Friday. With bond yields remaining low, investors continue to see stocks as the main vehicle of returns.
