Source: Yahoo Finance
Author: Brian Sozzi
Article: Original article
Publication date: Monday, 5 Dec 2022
One of the strongest market skeptics gets back to his old habits. Morgan Stanley Strategist Mike Wilson warns that the recent rally which embraced the market needs a break.
According to Wilson and other analysts, falling interest rates eventually led to this bear market rally. However, in his opinion, the growth potential is pretty low at the moment, since the S&P 500 is now right in the target range of 4000-4150. Thus, he wrote that we're back on the sellers' side. Several weeks ago Wilson predicted the market bounce.
The S&P 500 and Nasdaq Composite indices rose more than 6% and 7% last month, respectively, while the Dow Jones Industrial Average has gained 5%.
The rise was driven by a pullback in the U.S. dollar, signs of declining inflation and the Fed’s actions that could slow the pace of interest rate hikes.
However, last week's November jobs report, which questioned the potential for a more dovish Fed policy, undermined that bullish thesis.
Wilson advises to stay defensively oriented, since rates are likely to fall even more next year against the background of the slowing inflation. Growth stocks, in his opinion, won’t be beneficial with declined rates given the risk to earnings, especially for technology and consumer-oriented companies whose stocks carry a lot of weight in indexes. Other Wall Street strategists advise to be more cautious as well.
Goldman Sachs said it expects no earnings growth for S&P 500 companies next year and zero growth for the index itself.
Christian Mueller-Glissmann, strategist Goldman Sachs, said that it remains defensive for the three-month horizon, since rising real yields and economic growth uncertainty are likely to bring more hindrance.
Forecast: S&P 500 correction
This content is for informational purposes only and is not intended to be investing advice.
