Don't buy into the current stock rally as the final stages of the bear market have yet to play out, Morgan Stanley's top strategist says

The recent stock rally resembles a bear-market head fake, according to Morgan Stanley's Mike Wilson. He warned investors not to bite on the current optimism because downbeat

earnings are ahead. "We think the earnings recession is imminent," Wilson wrote in a note this week. Investors shouldn't let the current stock market surge fool them into

buying the rally because corporate earnings are still set to decline, according to Morgan Stanley's Michael Wilson.  In a note on Sunday, the firm's top strategist explained

that more and more investors are beginning to entertain the idea of an economic soft landing, or have postponed their recession forecasts to later in the year due to China's

reopening and falling natural gas prices in Europe. But the bear market isn't over yet, he said. "The final stages of the bear market are always the trickiest, and we

have been on high alert for such head fakes, like the rally from October to December we anticipated and traded," Wilson warned, noting that investors shouldn't lose focus as price

action and confusing data emerge. "Suffice it to say, we're not biting on this recent rally because our work and process are so convincingly bearish on earnings." He pointed

out that Morgan Stanley's research has forecasted a steep dip in forward earnings estimates, independent of any recession call. The last two times the bank's model clocked in this

far below consensus, the S&P 500 fell by 34% and 49%.  The exact magnitude of those figures could be wrong, but Wilson maintained that they appear directionally

correct.