June 30, 2022

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Bearish rally paves way for correction: Morgan Stanley warns

Bearish rally paves way for correction: Morgan Stanley warns

There is a major company on Wall Street watching the correction.

Despite the recent rally in the market, Mike Wilson of Morgan Stanley is preparing for a Standard & Poor’s 500 It’s down at least 13% between now and September.

Wilson cited technical headwinds on CNBC.fast money” on Monday.

“It really has all the hallmarks of what I would call the rally of a bear market,” said the company’s chief equity analyst and chief investment officer. “Things have been oversold.”

It also distinguishes people with technical expertise NasdaqWhich rose about 2% on Monday. It’s up more than 13% over the past three weeks.

“The Nasdaq has run into resistance again here… back to the 200-day moving average,” added Wilson. “It’s a good time to stay on defense because, look, we’re behind.”

He has been concerned that inflation is rising and the Fed’s tightening policy is increasing the risks of a recession. It could create an environment, according to Wilson, where stocks will perform worse than bonds.

“We don’t think there will be a recession this year,” Wilson said. “But there may be a recession next year.” “So, the markets will trade defensively.”

Wilson, Biggest bear on the marketbelieves the S&P 500 will eventually end the year at 4,400 — down about 9% from the index’s January 4 high.

“We are redoubling our efforts in defense”

“We are doubling our defensive capabilities,” Wilson wrote in his research note Monday. “Growth has become the primary concern of equity investors, not higher rates.”

Includes Wilson Market Guide ServicesAnd the Consumer Goods And the health care to excel.

In “Fast Money” last winteralso touted the advantages of stock picks with defensive qualities and a blast under 4,000.

“I need something less than 4,000 to be really constructive,” Wilson said on January 24. “I think it’s going to happen.”

Now, he is open to easing his downtrend if the Fed does not raise interest rates as quickly or hard.

“Maybe this is off the table given the inflation that is there,” Wilson noted. “But this would be a real elixir that would probably allow the markets to go a little further.”

It also lists better than expected earnings as a potential bullish wildcard. First-quarter earnings season begins a week from Wednesday.

“If we’re wrong, it will be on earnings,” Wilson said. “It won’t be because finances are going down again.” “It will be because earnings will not disappoint us as we expect as the year goes on.”

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