Wall Street is becoming increasingly bearish. According to the Morgan Stanley strategists led by Michael Wilson, the market sell-off could continue through the end of the year. A plunge of more than 20 percent is looking like a real possibility. Wilson’ mid-2022 S&P 500 target of 4225 is down about 3 percent from here. 

“What good news is left?” asks Savita Subramanian’s Bank of America team. She predicts the S&P 500 will rise only 4 percent between now and the end of 2022. Her long-term valuation model indicates negative returns over the next decade (–0.8 percent annualized returns) for the first time since the dotcom bubble. 

Behind the cautious outlook is wage inflation and supply-chain disruptions weighing on corporate margins, and higher interest rates posing headwinds to extended valuations. Add to that the observation that global equities have never rallied so much, nor credit spreads tightened so quickly, in the year following a recession.

Earnings for S&P 500 companies have beaten analysts’ estimates by double-digit percentages since the second quarter of 2020. That compares to a median beat rate of 5 percent