Morgan Stanley stated in a Monday note that investors shouldn't be convinced they are witnessing a new bullish market. However, Morgan Stanley warned that an earnings recession could still prove to be a significant obstacle to any gains this fiscal year. Strategists stated that although last week's events didn't result in an immediate reversal of the latest bear market rally but they also said that there was no evidence to suggest that a new bullish trend began in October. This refers to the stock surge last week after the Federal Open Market Committee meeting. Investors began to value in a reduction in Fed's aggressive monetary policies after the central bankers raised interest rates by 25 basis points on Wednesday. Commentators believe a pause in rate increases or a cut would be a positive for stocks. This is because rising interest rates have weighed heavily on the market over the past year. Investors began to price in monetary policy's end. These are signs that the economy can withstand tighter conditions. Powell previously stated that a tight labor market is a reason why the Fed should not reduce its monetary policy. The note stated that there is no reason to be excited for equity investors about a reduction in rates. Over the past 23 years, negative earnings per share growth has occurred only four times. Each year was followed by a "significantly" price decline in the stock market. This analysis is made more powerful by the fact that historically, most of the price decline in equity shares occurs after forward EPS growth turns negative. According to Mike Wilson, Morgan Stanley's top stock strategist, stocks could plummet as high as 20% in the first two-thirds of the year. Wilson warned investors to be prepared for greater volatility in the near future.