Stocks have yet to bottom and could fall another 23% this year amid slowing growth, Morgan Stanley says

According to Morgan Stanley, stocks haven't bottomed yet and could fall as much as 23%.

In the best-case scenario, the bank predicted that the S&P 500 would fall to 3,400 by the end of the year and then fall further in a recession. That's from the current levels.

"While acknowledging the poor performance in equities year-to-date, we do not think the bear market is over if our earnings forecasts are correct," a team of analysts from Morgan Stanley said.

The analysts have lowered their estimates for S&P 500 earnings per share to $212 from $236 in the next year.

Morgan Stanley predicts that the S&P 500 will recover next year, rising as high as 3,900, or to 3,350 in a bearish scenario.

The Federal Reserve is expected to raise its rate by 50 to 75 basis points this month, which could slow earnings further.

The next several quarters will contain some of the most significant downward revisions to forward earnings per share forecasts we have seen in the past.