The year 2022 ranked among the worst in Wall Street history, with decades-high inflation, a hawkish Fed, skyrocketing commodity prices and a war in Ukraine revving up fears of a recession.

Some bulls predict inflation will crash much faster than expected and the Fed will pause its interest rate hikes. Historically, stocks have rallied when inflation subsides. However, not everyone is convinced the economy will improve fast.

Even the pessimists may be too optimistic when it comes to predicting how bad the economy will be in 2023. Michael Wilson, chief investment officer at Morgan Stanley, predicts that U.S. equities could slump another 22 percent from current levels.

Wilson, who ranked No. 1 in the 2022 Institutional Investor survey, has consistently been one of the most vocal bears on U.S. stocks, Bloomberg reported.

While investors are generally pessimistic about the outlook for economic growth, Wilson said corporate profit estimates are still too high and the equity risk premium is at its lowest since the run-up to 2008. That suggests the S&P 500 could fall much lower than the 3,500 to 3,600 points the market currently estimates in the event of a mild recession, he said.

“The consensus could be right directionally, but wrong in terms of magnitude,” Wilson said, warning that the benchmark could bottom around 3,000 points — about 22 percent below current levels.

The impact of peaking inflation is helping drive Wilson’s bearish view, Sagarika Jaisinghani wrote for Bloomberg. U.S. stocks rallied the first week of January amid signs that a modest slowdown in price increases could mean a slowdown in interest rate increases by the Federal Reserve.

However, Wilson warned that while a peak in inflation would support bond markets, “it’s also very negative for profitability.” He still expects margins to stay disappointing through 2023.

Wilson is hardly the lone bear on and around Wall Street. Goldman Sachs strategists expect lower profit margins, changes in U.S. corporate tax policies and the likelihood of recession to overshadow the positive impact from China’s economic reopening.

Deutsche Bank strategists led by Binky Chadha also expect U.S. earnings to decline in 2023. However, they said stocks could rally thanks to a year-end selloff and low investor positioning.

Some bulls are predicting a scenario opposite from Wilson’s prediction of stocks going down 22 percent from current levels.

“We anticipate the last rate hike in this cycle will happen in February – sooner than what the futures market is pricing in. And a pause is bullish for stocks. Our stock prediction? We think a Fed pause could kickstart a 12-month breakout on the order of 20%-plus,” financial research firm Investor Place reported in an article titled “10 Bullish Predictions for a Stock Market Boom in 2023.”

Photo: Traders work on the floor at the New York Stock Exchange, Nov. 10, 2022. (AP Photo/Seth Wenig)