The strengthening U.S. dollar is creating an unacceptable situation that could lead to a financial crisis, Morgan Stanley says.

The recent rally in the U.S. dollar is creating an untenable situation for risky assets, including stocks, and in the past such dollar strength has led to some sort of financial or economic crisis.

While such 'events' are difficult to predict, the conditions for one are there, Morgan Stanley chief U.S. equities strategist Michael Wilson wrote in a note, citing the 2008 global financial crisis, the 2012 sovereign debt crisis and the stock bubble in 2000. The U.S. dollar index is up 19% this year, while U.S. stocks are down 23%.

Wilson believes that a possible low for the benchmark S&P 500 index would come late this year or early next year at 3,000-3,400 points. That would mean a 13% decline in the middle. The benchmark futures contracts fell 0.7% on Monday, with the gauge set to continue last week's decline.

The rising dollar is hurting the value of U.S. companies' international sales, with Morgan Stanley calculating that every 1% change in the dollar index negatively affects earnings by 0.5%. Wilson said S&P 500 earnings will face about a 10 percent headwind in the fourth quarter because of a stronger currency, in addition to other problems such as a sharp rise in costs.

The strategist, who correctly predicted a decline in U.S. stocks this year, said the reaction to the FedEx Corp. warning earlier this month showed that big earnings disappointments have yet to be factored into consensus estimates.