Morgan Stanley says it's time to start buying stocks amid market carnage

• The current level of US stocks offers an attractive entry point, meaning that longer-term investors should start buying, a team of Morgan Stanley strategists led by Michael Wilson wrote in a Thursday note.
• All three major US indexes fell into a bear market on Thursday. The S&P 500 fell below 2,600, Morgan Stanley's downside case, and is now pricing in a recession, according to the note.
• That likely means swift Fed action, which is part of the "bottoming process" in US markets, Morgan Stanley said.
• Read more on Business Insider.

As markets continue to fall amid concerns over the coronavirus pandemic, Morgan Stanley says that lower prices could give investors an opportunity to buy at a discount.

The S&P 500 at a level between 2,550 and 2,600 - below Morgan Stanley's downside case - "offers an attractive risk reward" profile for investors with a six-to-12 month horizon, and "buying should begin," a team of equity strategists led by Michael Wilson wrote in a Thursday note.

During intraday trading on Thursday, the S&P 500 fell into or below that range. At the same time, the Dow Jones Industrial Average fell more than 2,100 points and the Nasdaq declined nearly 8%, putting all three major US indexes solidly into bear market territory.

The market has been dragged down by shocks from the coronavirus pandemic and the global oil-price war, and now US stocks have "appropriately" moved to price in a recession, Wilson wrote. That means that further action from the Federal Reserve to boost the economy is likely imminent, according to the note.

"While that will not prevent a recession it is part of the bottoming process especially if fiscal policy follows from multiple regions of the world," said Wilson.

As for what sectors could provide solid opportunities for investors, Morgan Stanley said that the worst performance for industry groups usually comes in the three months following the start of a recession, which likely began in February or March, with a widening dispersion of returns after that period.

Healthcare and staples tend to have the most durability in recessions, while autos and tech hardware lag the longest, according to the note.

"From a style perspective lean toward quality and avoid junk," Wilson said.