Morgan Stanley strategist who predicted volatility says buy now

The Morgan Stanley strategist who predicted volatility would ramp up in 2018 says the damage has been done and it's time to buy stocks. Michael Wilson, the firm's chief U.S. equity strategist, said the "volatility shock" that hit equity markets last week has pushed valuations down to attractive levels, with the S&P 500 Index trading at just 16 times forward 12-month earnings per share. This is a "level we believe is too cheap" given that 10-year Treasury yields remain below 3%, Mr. Wilson said in a note to clients Monday. The S&P 500 Index headed higher Monday. As of 2:43 p.m. New York time, it was up 1.63%, or 42.67 points, at 2662.22. Mr. Wilson's recommendation to be a disciplined buyer of stocks at these levels contrasts with his call from a week ago, when he said there was "no rush to buy this dip." But last week's market action, which saw the S&P 500 dip into official correction territory from its Jan. 26 high, changed his tune. Mr. Wilson believes "most of the price damage is over for this correction," although he doesn't expect volatility to return to the extreme calm that characterized 2017. "As a result, we do not expect a quick return to the prior highs although we do think higher highs for the S&P 500 are likely ahead of us before the cycle top later this year," he wrote. Mr. Wilson sees the index ending the year at 2,750, 5% above current levels. (More: How advisers' favorite fund families have fared amid stock volatility)