One of Wall Street’s most bearish strategists said US equities are facing a wall of worry, which could fuel a sharp selloff in the near future.

Morgan Stanley’s Michael Wilson, whose outlook for a market slump in 2023 has yet to materialize, sees the S&P 500 at risk of a near-term drawdown. He expects the benchmark index to end this year at 3,900 — about 10% below Friday’s close — before rising to 4,200 in the second quarter of next year.

“The headwinds significantly outweigh the tailwinds and we believe risks for a major correction have rarely been higher,” Wilson said in a client note on Monday.

Morgan Stanley is sticking with an outlook for earnings that’s below the market consensus, expecting S&P 500 EPS to be $185 this year compared with the average estimate of $220. Wilson said deteriorating pricing and top-line disappointment will drive the earnings misses.

In addition to profit risks, Wilson also reiterated the headwinds from deteriorating liquidity due to record Treasury issuance levels and fading fiscal support. He expects value shares to outperform growth as investors turn to defensive sectors.

After rallying to the highest level since April 2022 earlier this month, the S&P 500 has been retreating amid concerns that the hawkish Federal Reserve will drive the economy into a contraction as it battles stubbornly high inflation.