US stocks are ripe for a selloff ...
... after prematurely pricing in a pause in Federal Reserve rate hikes, according to Morgan Stanley strategists.
“While the recent move higher in front-end rates is supportive of the notion that the Fed may remain restrictive for longer than appreciated, the equity market is refusing to accept this reality,” a team led by Michael Wilson wrote in a note.
Wilson — a staunch Wall Street bear who correctly predicted last year’s selloff when US equities posted their worst performance since 2008 — expects deteriorating fundamentals, along with Fed hikes that are coming at the same time as an earnings recession, to drive equities to an ultimate low this spring.
“Price is about as disconnected from reality as it’s been during this bear market,” the strategists said.
Bloomberg 13 February 2023
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