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Morgan Stanley: US stocks face 7% short-term drop risk, but year-end rebound expected
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Morgan Stanley strategists led by Michael Wilson have warned that the US stock market is vulnerable to further energy price increases and heightened bond market volatility. In such a scenario, the S&P 500 could fall by as much as 7%, potentially dropping to 7,100 points. The strategists note that while strong corporate earnings have so far helped stocks withstand rising bond yields, the S&P 500's valuation has slipped to its lowest level since March over the past four months. Wilson wrote that if valuation corrections worsen due to tighter financial conditions or a sharp rise in energy prices, the index could fall to 7,100 before a bull market recovery later in the year. He also expects market volatility to increase ahead of the November midterm elections but ultimately believes strong earnings prospects will drive a year-end rally, pushing the index toward his 8,000-point target, which would represent a gain of nearly 5% from current levels.
Source report
September 21 – A team of strategists led by Michael Wilson at Morgan Stanley has warned that U.S. equities remain vulnerable to further increases in energy prices and heightened volatility in the bond market, a scenario that could trigger a decline of up to 7% in the S&P 500.
According to the strategists, while strong corporate earnings have so far helped stocks withstand pressure from rising bond yields, the valuation of the S&P 500 has already fallen over the past four months to its lowest level since March.
In a report, Wilson stated:
"If valuation corrections deteriorate further in the near term due to tighter financial conditions and/or a sharp rise in energy prices, we believe the S&P 500 could fall to 7,100 points before the bull market resumes by year-end."
A drop to 7,100 would represent a 7% decline from the index's closing level last Friday.
Wilson also noted that market volatility is expected to increase ahead of the November midterm elections. However, he ultimately believes that a strong corporate earnings outlook will drive a year-end rebound, bringing the index closer to his 8,000-point target—implying a gain of nearly 5% from current levels.
Source
金十数据Neutral / independent
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Morgan Stanley warns S&P 500 could drop 7% to 7,100 on energy and bond risks