Morgan Stanley warns that the 2023 stock rally is a "bull trap"
Per Business Insider
Morgan Stanley warns against investors getting too positive in the recent stock rally. The company is saying that this could just be a "bull trap" and that investors have to brace themselves for what's to come.
Mike Wilson gave a statement sharing how the equity market is doing and that it was showing signs of exhaustion. Morgan Stanley's chief US equity strategist shared how March was a month of "high risk."
Wilson: "With the equity market showing signs of exhaustion after the last Fed meeting, the S&P 500 is at critical technical support. Given our view on earnings, March is a high risk month for the bear market to resume,"
He then said they think the rally is actually a bull trap. The S&P 500 reportedly showed improvement as it rose by 9% in early February, but Morgan Stanley still believes that a drop is to come.
Wilson previously said that stocks were too high and in the "danger zone," saying that it could drop by 26%, during the time of reporting, down to 3,000 points. Morgan Stanley's chief US equity strategist said the stock market reached "unsustainable heights."
This drop could happen as early as March, expecting the S&P 500 to drop to 4,000's critical level, which has remained since January. Morgan Stanley said earnings would reveal if the market really is in a bull trap.
"Bottom line, the US Dollar and rates could determine the short term path of stock prices while earnings will ultimately tell us if this is a new bull market or bull trap,"
For the first time since 2001, cash outperformed stock-bond portfolios, meaning individuals would get more than the 60/40 strategy. Six-month US Treasury bills reportedly reached new heights at 5.16%, compared to fixed-income assets at 5.07%.
See flow at unusualwhales.com/flow.
Other News:
- Morgan Stanley's Mike Wilson says stocks are now in a 'death zone' after climbing too high
- Cash trumps stock-bond portfolios for the first time since 2001
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