(Bloomberg) -- US equities are set for their worst year since the global financial crisis, and, according to Morgan Stanley strategist Michael Wilson, corporate profits are about to meet the same fate.

A looming earnings recession “by itself could be similar to what transpired in 2008/2009,” said Wilson. That could spark a new stock-market low that’s “much worse than what most investors are expecting,” he wrote in a note.

“Our advice — don’t assume the market is pricing this kind of outcome until it actually happens,” Wilson said.

The strategist — a stalwart equities bear who called this year’s slump — said that although inflation has started easing from historic highs, recent signs of weakening in the US economy were worrying.

Morgan Stanley’s team is now leaning toward its bear case forecast for earnings of $180 per share in 2023 compared with analysts’ expectations of $231. That — combined with the fact that the current equity risk premium is lower than in August 2008 even though valuations are higher — could see the S&P 500 sinking to as low as 3,000 points next year, they said, implying declines of 22% from its Friday close.

To be sure, Wilson doesn’t foresee a systemic financial risk or signs of distress in the housing market and, therefore, doesn’t expect 50% downside for stocks, as in 2008.

A two-month rally in US stocks has fizzled out — keeping the S&P 500 on track for its biggest annual slump since 2008 — following staunchly hawkish signals from the Federal Reserve and the European Central Bank. US stocks last week failed to overcome a technical downtrend in place since the start of the year, which has put an end to the past three bear-market rallies. Strategists at Goldman Sachs Group Inc. have also warned about the risk to profit margins next year as inflation remains high.

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Among sectors, Wilson said he’s overweight health care, staples and utilities, and underweight discretionary and tech hardware stocks.

--With assistance from Farah Elbahrawy and Michael Msika.

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