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US News between "Fire and Ice": Morgan Stanley Strategist predicts 20% crash at the S & P 500

05:40  24 september  2021
05:40  24 september  2021 Source:   finanzen.net

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Among Wall Street strategists , Morgan Stanley is more bearish than most, but their views echo other banks that have come out with ominous predictions recently. We don’t know, but the ice scenario would be worse for markets and we are leaning in that direction,” Morgan Stanley ’ s strategists wrote. “We think the mid-cycle transition will end with the rolling correction finally hitting the S & P 500 .” The bank recommended investors stick to defensive, quality companies to protect themselves and keep some exposure to financial stocks, which will benefit from rising interest rates.

Among Wall Street strategists , Morgan Stanley is more bearish than most, but their views echo other banks that have come out with ominous predictions recently. We don’t know, but the ice scenario would be worse for markets and we are leaning in that direction,” Morgan Stanley ’ s strategists wrote. “We think the mid-cycle transition will end with the rolling correction finally hitting the S & P 500 .” The bank recommended investors stick to defensive, quality companies to protect themselves and keep some exposure to financial stocks, which will benefit from rising interest rates.

when it goes to Morgan Stanley Strategist Mike Wilson, it is likely to go downhill at the stock market. In a customer note, the chief analyst predicts possible "fire" and "ice" scenarios.

DANIEL ROLAND/AFP/Getty Images © Provided by finanzen.net Daniel Roland / AFP / Getty Images

• Fed represents Tapering Decision in November

• Morgan Stanley says Correction at the S & P 500 Advance

• Course crash of up to 20 percent possible

Fed could Tapering in the Announcing November

The focus of the investors has been strengthened since the beginning of the pandemic on the decisions of the central banks. Only this week, the US monetary houses confirmed, for example, to still want to leave the key interest rate in the low range between 0 and 0.25 percent . In the coming year, however, it can come to interest rate hikes, as the German press agency reported on Wednesday after the meeting. In November this year, the next Fed meeting is at first, in which, according to central bank President Jerome Powell then the "tapering" could be announced, ie the reduction of bond purchases. "If progress on and large, the committee believes that a reduction in purchases could soon be justified," wrote the Fed in the declaration of meetings. When and how quickly that happens, it is not yet known. "We have not decided on the pace yet," quotes the agency Powell.

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While it’ s still a worst-case scenario, the bank said that evidence is starting to point to weaker growth and falling consumer confidence. In a note on Monday, the strategists laid out two directions for U. S . markets, which they dubbed as “ fire and ice .” In the fire outcome, the more optimistic view, the Federal Reserve Stocks globally fell on Monday on concern that the debt crisis at China Evergrande Group could impact the broader financial system. U. S . futures pointed to a drop of about 1% at the market open. Still, the S & P 500 is just about 2% off its all-time highs. Among Wall Street strategists , Morgan

Among Wall Street strategists , Morgan Stanley is more pessimistic than most, but its views echo other banks that have recently made bearish predictions . Strategists from Goldman Sachs and Citigroup also highlighted the possibility of negative shocks ending the period of gains in the US market. We don’t know, but the ice scenario would be worse for the markets and we are leaning in that direction,” wrote Morgan Stanley strategists . “We believe the mid-cycle transition will end with the fix finally hitting the S & P 500 .” The bank recommended that investors opt for defensive, quality stocks as

Morgan Stanley Analyst between "Fire and Ice"

Already in the run-up to the session, market participants calculated that the Fed approaches the beginning of the tapering, with the November announcement, however, they were now continued. Thus, it remains to be seen first to whose decision the central bank comes in November and how quickly it is implemented. The consequences for the stock market remain open for the time being. In the US large bank Morgan Stanley , however, you are sure that the courses will first go down. For this, Mike Wilson, chief strategists for US shares at Morgan Stanley, presented two possible scenarios in a customer note, as "The Street" writes.

Healthy Correction by "Fire" Szenario

So the market is standing in front of a pavement between "fire" and "ice", as Wilson explains. In the optimistic "fire" scenario, according to "Bloomberg", the strategist covers the case for the case that the Fed returns its economic packages to increase economic growth not too fast. Although the S & P 500 , the index of the 500 largest listed US companies could break by about ten percent, according to the analysts, however, this decline is modest - and even quite well.

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Morgan Stanley ’ s Michael Wilson sees the bull market ending in fire , though it could end in ice . Invoking the imagery from the Robert Frost poem “ Fire & Ice ,” the Morgan Stanley strategist said that he sees earnings revisions from American corporations “and higher frequency macro data” pointing to a decelerating economy, “amid demand pull forward, supply chain issues and The S & P 500 hasn’t seen a 5% pullback from its peak in about 220 sessions, the longest run since 2016, when the market went 404 sessions without falling by at least 5% peak to trough, according to Dow Jones Market Data.

The warning from Morgan Stanley comes as global markets were hammered Monday amid concerns that problems in China’ s property sector could cause contagion all over the world. Should the " ice " scenario play out, it would be the first bear market for the S & P 500 since the index plunged 34% from Feb. The Morgan Stanley strategists say investors should take a defensive posture in high-quality health care and consumer staples companies while also maintaining some exposure to financials to be protected against a possible rise in interest rates.

"Ice" scenario could be S & P 500 by 20 percent in the minus

but otherwise it looks when the "ice" scenario occurs. The prerequisite for this would be that the economy is not only slowed down, but also reduce yields, so Wilson according to the news agency. "In view of the extraordinary fiscal incentives during this recession, we are worried that the inevitable slowdown of growth will be much worse than currently expected," he is quoted by "CNBC". "This is the 'Ice' scenario and it would probably lead to an above-average correction of the S & P 500 in the middle of the cycle - 20 percent."

Morgan Stanley tends to "Ice" Scenario

also the competitors Goldman Sachs and Citigroup have issued pessimistic forecasts for future development of the market, as Bloomberg emphasizes, yet Fat Wilson's assessment fatal. So Morgan Stanley is rather from the "ice cream" scenario. "Will it be fire or ice? We do not know it, but the ice scenario would be worse for the markets and we tend to this direction," says the strategist and his colleagues. For additional pressure, weak economic data could also provide.

to respond to the entry of the "Ice" scenario, Wilson recommends investors to invest in defensive quality companies, according to the Street and to keep some financial values ​​in the portfolio, as they can gain growth due to rising interest rates. Editorial Finanzen.net

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