U.S. stocks are already in the throes of a rolling bear market and could be paralyzed for the next several years as earnings growth decelerates, Morgan Stanley's chief equity strategist, Michael Wilson, said in a note.
Wilson said he expects the S&P 500 to trade in range between 2,400 and 3,000 for the next several years as higher borrowing costs replace strong earnings as the market's primary focus.
While the strategist was quick to point out that many on Wall Street are already pricing in an earnings slowdown, he argued that others may not be bearish enough.
"We think this 'rolling bear market' has already begun with peak valuations in December and peak sentiment in January," Wilson told clients.
"We view the rate of change in earnings growth as one of the most important drivers of equity prices broadly; so our belief that earnings growth is likely to slow more in 2019 than the market anticipates is important for our less optimistic view on equities," he added.
Morgan Stanley explained that its forecast for lower earnings and profit growth can be traced to an expected uptick in supply-side costs. Energy, transports, labor, funding, tariffs and material costs should all usher costs higher, Wilson said.
As the most bearish strategist tracked in CNBC's regular survey, Wilson has a June 2019 S&P 500 target of 2,750, implying more than 4 percent downside from current levels.
The strategist has defended his call for a bear market despite the S&P 500 clinching all-time highs as recently as Aug. 29.
The Dow Jones Industrial Average has not breached January's record high.
Corporate profits in the second quarter rose sharply on a year-over-year basis. According to data from FactSet, S&P 500 earnings surged 25 percent in the previous quarter.
"Our call is not for a simultaneous and large repricing across risk assets, but for a bear market that rolls through different assets and sectors at different times with the weakest links being hit first/hardest," Wilson said.
Assets like bitcoin, emerging market debt and equities, base metals and homebuilders could be particularly risky, he said. Looking at each sector, Wilson reiterated his pessimism on information technology.
"It makes sense to lower broad exposure in the near term as elevated valuations, lack of material earnings upside against expectations, extended positioning, technicals, and trade related risks all add up to a poor risk reward for the sector in the near term," Morgan Stanley said.
Since the brokerage downgraded the industry to underweight on July 9, S&P 500 technology companies have underperformed. Tech names are up 2.9 percent since the call versus the broader market's 3.5 percent climb.