In a Monday note, the investment bank’s strategists, led by Michael J. Wilson, said that “the S&P 500 appears ready to join the ongoing bear market” ahead of a stacked week of earnings reports from tech companies like Amazon and Apple.

“In short, the market has been so picked over at this point, it’s not clear where the next rotation lies,” the analysts wrote. “In our experience, when that happens, it usually means the overall index is about to fall sharply, with almost all stocks falling in unison.”

If the analysts are correct and the S&P 500 does enter bear-market territory, it would mean a 20% drop from the index’s early January record close of 4,793.54. That would take the S&P 500 to 3,837.25, or around 9.5% below its Monday level. 

In the past month alone, the S&P 500 has fallen nearly 7% as investors weigh the possibility of a faster pace of interest rate hikes from the Federal Reserve in the coming months. 

The Fed already raised rates by a quarter of a percentage point in March, and last week Fed Chair Jerome Powell said that a half a percentage-point hike could be in the cards in May.

Morgan Stanley said the Fed’s policies likely mean inflation has peaked, but cautioned that may not be the best thing for public companies and economic growth.

“The problem is that falling inflation comes with lower nominal GDP growth and therefore sales and EPS growth too. For many companies it could be particularly painful if those declines in inflation are swift and sharp,” the analysts wrote.

The investment bank’s bearish forecast comes after the International Monetary Fund (IMF) slashed its forecasts for global economic growth from January’s 4.4% figure to 3.6% last week, citing pressures from the ongoing Russia-Ukraine war. The World Bank proved to be even more pessimistic, cutting its global growth forecast on April 18 to just 3.2%, arguing that higher food and fuel costs will instigate a global economic slowdown.

The Morgan Stanley analysts, who typically come up with a “fresh money buy list” for investors, admitted they are at “a loss for new ideas” this week, but recommended investors stick with pharma and biotech companies due to their “defensive attributes” in this market.

Morgan Stanley isn’t the first investment bank to call for a bear market moving forward. Deutsche Bank said in early April it sees the U.S. heading into a recession by 2023, and Bank of America has warned a “recession shock” could be ahead, as the Fed acts to combat inflation.