A major Wall Street firm is on watch.
Morgan Stanley's Mike Wilson is bracing for a decline in the S&P 500 between now and September.
On Monday, Wilson cited technical problems with CNBC's Fast Money.
It has all the hallmarks of a bear market rally, according to the firm's chief U.S. equity strategist and chief investment officer.
He singles out the tech-laden Nasdaq, which was up 2% on Monday. Over the past three weeks, it has risen more than 13%.
Wilson said that the Nasdaq has run into resistance again and that it was a good time to remain defensive.
The Federal Reserve's tightening policy has made him worry about recession risks. According to Wilson, it could create an environment where stocks perform worse than bonds.
We don't think there is a recession this year. The markets are going to trade defensively.
Wilson believes the S&P 500 will end the year at 4,400, a 9% drop from the index's all-time high.
Wilson wrote in his Monday research note that growth is becoming the primary concern for equity investors.
Utility, consumer staple and health care are included in Wilson's market plan.
On Fast Money last winter, he talked about the merits of stock picks with defensive qualities and a burst below 4,000.
Wilson said on January 24 that he needed something below 4,000 to be constructive.
If the Fed doesn't raise rates fast or hard, he's open to changing his stance.
It's probably off the table given the inflation that's out there.
Better-than-expected earnings are a potential upside wildcard. The first quarter earnings season begins on Wednesday.
If we are wrong, it will be on earnings. Wilson said it wasn't going to be because financial conditions loosen up again.
There is no truth to this.
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