A potential Russian invasion of Ukraine could push economies into recession, posing another significant risk for equity markets, according to one of Wall Street's most vocal bears.
A war "materially increases the odds of a polar vortex for the economy and earnings," Morgan Stanley's chief U.S. equity strategist Michael Wilson wrote in a note to clients.
A spike in energy prices "would destroy demand, in our view, and perhaps tip several economies into an outright recession," the strategist and his team said, adding that energy stocks are most at risk of a selloff.
Crude oil prices rose, and natural gas surged in European markets on Monday, amid warnings from the U.S. government that Russia could mount an invasion as soon as this week.
The standoff pushed Asian and European stocks lower, exacerbating this year's rout triggered by fears that central banks will raise interest rates more aggressively than previously anticipated to tame surging inflation. Russian officials have repeatedly denied plans to attack Ukraine.
Wilson, who has persistently warned that U.S. equity markets are heading for a correction and has the lowest year-end target for the S&P 500 index out of all strategists surveyed by Bloomberg, said Monday that investors will soon shift their focus from inflation to economic growth.
