Morgan Stanley's US stock chief sees more than 20% downside coming for the S&P 500 and warns of an earnings recession on banking sector turmoil

• Morgan Stanley's Mike Wilson backed his forecast for an earnings recession amid banking sector concerns.
• The equity strategist sees the S&P 500 falling more than 20% before parring losses by year-end. 
• JPMorgan, Citigroup, and Wells Fargo are kicking off earnings on Friday.

Morgan Stanley forecasts a downturn coming for US stocks, with the S&P 500 dropping over 20% later this year amid a looming earnings recession and fallout in the banking sector.

Mike Wilson, the Wall Street giant's US chief equity strategist, reiterated his base-case scenario for the S&P 500 to end the year at 3,900, about 6% below current levels. His bear case is 3,600, and his bull case is 4,200.

But along the way, he still expects the gauge to hit a trough of 3,000-3,300 for this cycle, representing a decline of more than 20%.