The market is laser focused on the Fed, but there are other risks investors are not pricing in as a possible recession looms

Today, we're looking at two calls, one for the economy and one for the stock market. Unfortunately, neither are great.

Let's get right to it.

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1. Investors should stop obsessing over the Fed and get real about risk to earnings. That's according to Mike Wilson, Morgan Stanley's chief US equities strategist and CIO.

Wilson argues that the stock market is headed for another bottoming out by the end of this year, and the next leg down will kick off in September. Wilson told Bloomberg on Wednesday that investors aren't pricing in enough risk to earnings growth.

"We think earnings risk is upon us. We're cutting numbers, and we think that the numbers are going to come down further over the next two quarters," Wilson said.

Ultimately, he sees the S&P 500 down 15%-25% in the event of either a soft landing of the economy or a full blown recession in the worst case.

And, as UBS argues, the odds of said recession have increased dramatically this summer. The Swiss bank said in a note to clients this week that macroeconomic data points to a 60% chance the US economy will enter a recession in the next 12 months. That's up from 40% at the beginning of the summer.

Three factors are pointing the bank toward this prediction: macro data, the US treasury yield curve, and credit market data. The good news for now is that the bank's models are not pointing to a full recession.

"As we have argued before, historically, not all (sharp) slowdowns lead to recession... The US team's model forecast is that the contraction does not morph into a full-blown recession," the bank said.

August ended with a whimper, with the summer rally from June lows fizzling out in a string of four consecutive losing sessions, giving some weight to Wilson's prediction that the final stretch of 2022 could be a rough ride for traders.

Is the stock market headed for a new bottom before the year is out? Email madams@insider.com

In other news:

2. US stock futures fall early Thursday, as the yen touched a 24-year low overnight and bitcoin slipped below the $20,000 level. Here are the latest market moves.

3. On the docket: Lululemon, Broadcom, and Campbell Soup are all reporting.

4. More large-cap managers are beating their benchmarks than any year since 2009. That's according to Goldman Sachs, which noted bets on IT and consumer discretionary stocks. Here are their 20 favorite stocks to invest in through the first half of the year.

5. Inflation is starting to "drop like a rock," said Fundstrat's Tom Lee. He observed outright deflation in some areas of the economy, suggesting inflation is less sticky than perceived. That could change the Fed's rate-hike trajectory, leading to a faster pivot.

6. Russian oil shipments hit their highest-ever August level, according to the Institute of International Finance. That suggests the country's energy exports are holding up much better than expected. Greek-owned ships played the biggest role in getting Russia's oil to markets.

7. China's imports of Malaysian oil have soared to nearly 800,000 barrels per day, according to Bloomberg. That's more than what Malaysia actually produces on its own. The waters off Malaysia are known for ship-to-ship transfers that mix crude to hide its origin.

8. The head of research at a $600 million crypto investment firm explains the bull and bear case for ethereum. Ahead of the "merge,' investors participants are looking for ways to capitalize on the upgrade. Katie Talati explains how layer-2s can "turbocharge" the blockchain's growth.

9. Home affordability may have just hit an inflection point, said a top executive at the Mortgage Bankers Association. Buying a home became slightly cheaper in 47 of 50 states in July. Here are Eddie Seiler's predictions for the rest of 2022 as the housing market shifts.

10. As August came to a close, the crypto winter was still very chilly. This summer saw a modest rally in cryptocurrencies from their mid-June lows. But bitcoin gave up most of those gains in the past month.

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Curated by Max Adams in New York. (Feedback or tips? Email madams@insider.com)

Edited by Hallam Bullock (@hallam_bullock) in London.