People told you you were a pessimist. But being a pessimist is OK when being right makes you rich – right? A peek at the prognosis for stocks in Europe over the next 12 months. And it’s been rubber-stamped by Morgan Stanley. (Whatever that’s worth.)

A bear market in European stocks will last another six to 12 months and a "superbearish"" scenario featuring a prolonged period of stagflation can't be ruled out, the region's top-ranked strategists at Morgan Stanley said.

"We are not bullish on the remainder of 2008 as we think the bear-market rally is over," the strategists, led by London- based Teun Draaisma, wrote in a note dated May 23. "We have a real-estate crisis, a credit crunch, an inflation problem, an oil crisis" and peak margins, they said.

The Dow Jones Stoxx 600 Index tumbled 27 percent from June 1, 2007, through March 17, 2008, on concern the collapse of the U.S. subprime mortgage market would push the world's largest economy into a recession. That met the common definition of a bear market -- a 20 percent drop from a high within 12 months.

The Stoxx 600 then rebounded 15 percent from its 2008 low through May 19 as Bear Stearns Cos. was rescued and the Federal Reserve pledged to act as the lender of last resort for securities firms. The gauge has since lost 4.7 percent, amid concern that record high oil prices will curb earnings.

First-quarter corporate profits in western Europe have dropped 25.3 percent, 7.9 percentage points worse than for American companies, data compiled by Bloomberg showed, as a U.S. slowdown and a record-high euro also eroded overseas earnings.

That helped make the Stoxx 600 the cheapest in at least six years versus the Standard & Poor's 500 Index relative to earnings, according to Bloomberg data.

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