Disinflation will shift to deflation, hitting earnings and sending stocks lower, Morgan Stanley CIO says

• Deflation could become a headwind for stocks, Morgan Stanley's Mike Wilson warned.
• That's because falling prices takes away firms' pricing power, which hurts earnings.
• "[T]his is a slippery slope for earnings growth and hence stock valuations, which are now quite extended," Wilson said.

Disinflation is about to turn into deflation – a major headwind for corporate earnings, and in turn stock prices, that investors have yet to take into account, according to Morgan Stanley's chief stock strategist Mike Wilson.