Breaking News
Get 55% Off 0
Selloff or Market Correction? Either Way, Here's What to Do Next!
See Overvalued Stocks

Risks for major correction 'rarely been higher' says Morgan Stanley

Published Jun 26, 2023 14:34
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.
 
SPY
-2.98%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

In their U.S. equity strategy note Monday, Morgan Stanley analysts told investors that they believe "risks for a major correction have rarely been higher."

"In our view, the headwinds significantly outweigh the tailwinds," wrote analysts. "Our highest conviction view remains our well below consensus forecast for earnings this year—our base case 2023 EPS for S&P 500 is $185 (Bear $170/Bull $210) which compares to bottom-up consensus at $220 and top-down/buyside forecasts near $210-215."

"While last year's earnings misses were mostly a function of bloated cost structures as pandemic demand normalized, we believe the next leg will be about deteriorating pricing and top line disappointment," they added.

In addition to growth risks, analysts explained that the liquidity picture is starting to deteriorate due to record levels of Treasury issuance and QT, with Morgan Stanley estimating bank reserves will contract by $500 billion to $800 billion over the next six months which they see as likely having a negative impact on equity valuations.

"The technical picture remains poor with recent breadth improvement failing yet again," analysts continued.

They concluded that the firm believes value is likely to have a period of relative outperformance versus growth as "defensives reassert their leadership from last year."

Risks for major correction 'rarely been higher' says Morgan Stanley
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Apple
Continue with Google
or
Sign up with Email