🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

S&P 500 Ready to Join Bear Market, Says Morgan Stanley

Published 25/04/2022, 12:06
© Reuters
US500
-
MS
-
SPX
-

(Bloomberg) -- The S&P 500 is about to drop sharply, Morgan Stanley's Michael J. Wilson warned, as investors struggle to find havens amid fears of a recession and aggressive tightening by the Federal Reserve. 

“With defensive stocks now expensive and offering little absolute upside, the S&P 500 appears ready to join the ongoing bear market,” said Morgan Stanley strategists in a note on Monday. “The market has been so picked over at this point, it’s not clear where the next rotation lies. In our experience, when that happens, it usually means the overall index is about to fall sharply with almost all stocks falling in unison.”

The S&P 500 Index has slumped for three weeks in a row, sinking to the lowest level since mid-March on Friday as investors fled risk assets amid fears of rapid monetary tightening and its impact on economic growth. Fed Chair Jerome Powell’s endorsement of aggressive actions to curb inflation sent traders racing to price in half-percentage-point interest-rate increases at the bank’s next four meetings. 

Morgan Stanley strategists said a quickly tightening Fed is looking “right into the teeth of a slowdown” and that while defensive positioning has worked well since November, they don’t see more upside for these stocks as their valuations have swelled. 

At the same time, the strategists said that large-cap pharma and biotech shares’ defensive characteristics make them consistent outperformers in an environment of slowing earnings growth, decelerating PMIs and tighter monetary policy. 

“As the U.S. economy moves to a late cycle phase and GDP/earnings growth rates decelerate for the overall economy and market, we think Pharma/Biotech’s defensive properties will outweigh policy concern and drive relative performance higher,” they wrote.

©2022 Bloomberg L.P.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.