Why Wall Street is bracing for a correction in stocks

Key Points

1. Morgan Stanley strategist Mike Wilson projects the S&P 500 could decline by up to 10%, while Evercore estimates a potential 15% drop.

2. US equities, including megacap tech stocks, have seen significant gains this summer, with around 80% of S&P 500 companies closing above their 50-day moving average in late June.

3. Economic indicators such as rising inflation, slowing job growth, and reduced consumer spending suggest a less positive outlook.

4. August is historically a volatile month for stocks, with the S&P 500 averaging a -0.6% return over the past 35 years.

5. Analysts caution that while conditions suggest a potential market decline, unpredictable factors could influence outcomes.