“Somewhat vindicated.”

That’s how one mainstream financial media outlet described the persistently bearish view harbored by Morgan Stanley’s Mike Wilson, who still thinks earnings estimates are too optimistic for Q4 and next year.

“Vindicated,” “somewhat” or otherwise, might be a stretch absent a steeper slide for US equities. The S&P is still above Wilson’s year-end target, and although corporate America did succumb to a profit recession tied in part to negative operating leverage, I think it’s entirely fair to say the earnings contraction wasn’t the kind of dire affair some of Wilson’s commentary suggested it might be.

That could change, of course. The problem is, the US economy is accelerating and so is the labor market. GDP likely ran at a 4.3% pace last quarter, and jobs growth is picking back up. That’s just not the stuff deep earnings recessions are made of.

So, much as I’m a Mike Wilson fan, and while fully acknowledging that, as a fan, I’m personally inclined to give him a pass in consideration of all the times he got it right (2022, 2018 and on and on), 2023 just wasn’t his year. In my estimation, nothing can change that now. Maybe we’ll look up on December 31 and the S&P will be at 3,900 (Wilson’s target), but that’s not going to change the fact that bears were on the wrong side of a first-half barnburner that found the Nasdaq 100 posting its best H1 in recorded history.

All of that said, bearish calls look better now than they did three months ago, that’s for sure. The S&P is on track for a third straight monthly loss.

Assuming the S&P can’t turn things around, October would mark the first time the benchmark has suffered three consecutive monthly declines since the plague hit.

Wilson would cite a “sell the news” dynamic following Q2 reporting season, but most of the weakness for stocks since July was the direct result of the inexorable trek higher for long-end US yields. The never-ending Treasury selloff, more than anything else, is the headwind for stocks into year-end.

That said, reporting season has so far exhibited the same “sell the news” vibe from last quarter, only more pronounced. “The median T+1-day price reaction is -1.6% thus far in absolute terms [and] we also note that the percentage of positive reactions is notably lower as well,” Wilson wrote Monday.

Bloomberg Intelligence data paints a similarly lackluster picture. Misses are being punished severely. EPS undershoots underperformed by nearly 4% after reporting, BI said.

Mega-cap tech earnings will be a litmus test. Four of the “Magnificent 7” report in the days ahead. The underwhelming performance of companies beating estimates suggests the bar for an unequivocally upbeat market reaction is high.

As for Wilson’s overall outlook, it’s not sunny. “Based on our views on earnings, valuations and policy (both monetary and fiscal), we believe the S&P 500 will have a hard time getting back above what were previously levels of support (i.e., 4300-4400) tactically,” he said. “Instead, we think the index’s price action into year-end is more likely to mirror the average stock’s performance rather than the average stock catching up to the market cap weighted index.”

Morgan Stanley, Wilson reiterated, “remains comfortable” with a 3900 year-end target.