Stocks fell once more after US Federal Reserve Chairman Jerome Powell made it clear last week that rate hikes would continue – even if they cause more pain ahead. The S&P 500 and Dow Jones are both down more than 3% for the month, while the Nasdaq Composite is down about 4% over the same period. So what could cause stocks to fall next? Morgan Stanley and Wolfe Research have identified a number of factors they expect to determine future market moves. According to Morgan Stanley, this ‘risk-focused laser’ The biggest risk to non-Fed stocks is earnings. The bank’s strategists, led by Mike Wilson, wrote in an August 29 note. They said the stock’s performance in the second half of the year “will ultimately be determined by earnings expectations for next year, in our view.” “Therefore, equity investors should focus on this risk, not the Fed, especially as we head into the weakest seasonally of the year as earnings and inflation adjustments continue to eat into the future.” on margins and demand,” the strategists added. Morgan Stanley is tracking two specific metrics: The spread between growth in futures sales and the rate of change in the producer price index The difference between nominal GDP growth and wage growth. “Both indices show margin pressure and earnings growth risks ahead,” said Morgan Stanley. The rate of change on another metric the investment bank has tracked this year – earnings adjustment breadth – also points to a slowdown in growth, the bank’s analysts added. The earnings revision breadth is the difference between an analyst upgrade and a downgrade in the earnings estimate, on the total estimate change. ‘Consumers hold the key’ For Wolfe Research, ‘consumers hold the key’ to what’s next for the economy. “Consumer spending is very likely to determine whether our call for price cuts to the US economy and markets is ultimately true or false,” the company said in a note today. August 29. When it comes to consumer spending dynamics, the researcher said: “Our impression is that the biggest winds are fading rapidly, while the biggest gusts are growing. get stronger quickly.” Those strengthening obstacles include negative real income growth, high inflation, tighter credit, and falling consumer confidence, according to Wolfe Research. The company notes that even if personal consumption spending – which accounts for about 70% of US GDP – stabilizes, it still has plenty of upside ahead. Growth expectations and adjusted earnings are also indicators to watch closely, according to Wolfe Research. “We believe the Fed tightening is only just starting to affect the economy and the next big move in this bear market will be driven by expectations of reduced GDP growth and earnings adjustment,” the company said.