The US stock market is likely to witness a correction soon owing to US presidential elections, corporate earnings, and Federal Reserve policy on rate cuts, Morgan Stanley’s top strategist Mike Wilson said. He predicted, “I think the chance of a 10% correction is highly likely sometime between now and the election.”

The third quarter is “going to be choppy”, he added as the S&P 500 Index opened the week at all-time highs. The benchmark has gained 17 per cent this year owing to hopes that the Fed will cut rates twice this year. The benchmark has also gained owning to excitement around artificial intelligence after its 24% surge in 2023.

Mike Wilson said, “Your likelihood of upside from now until year end is very low, much lower than normal” as he placed the odds of stock prices closing the year higher than they are now at 20% to 25%.

The pullback is not concerning as it will create opportunities for investors to buy in since valuations are currently “unexciting”, he said, advising that the best way to play the stock market is through individual stocks rather than indexes. Talking about stocks that can deliver earnings, he said that momentum will continue but the problem is it’s hard to find shares in those categories that are cheap, adding, “If they were to come in 10%, then we’d probably get interested again.”

Mike Wilson’s comments come after Goldman Sachs Group Inc.’s Scott Rubner said that he’s modeling a painful two-week stretch starting in August if corporate earnings disappoint. JPMorgan Chase & Co.’s Andrew Tylersaid he’s bullish with “slightly less conviction” from recent weakening economic data while Citigroup Inc.’s Scott Chronert sounded the alarm on a potential pullback.