World’s high inventory strategist says buyers are falling right into a lure—once more

In late 2021, after three consecutive years of double-digit returns by the S&P 500, many Wall Road strategists have been positive the inventory market would proceed to soar in 2022. However Mike Wilson, Morgan Stanley’s chief funding officer and chief U.S. fairness strategist, wasn’t so optimistic. Wilson argued {that a} mixture of “hearth and ice”—or rising rates of interest and fading financial progress—would harm inventory costs and result in a difficult yr for buyers.

Each time the inventory market rallied all year long, Wilson warned that it was nothing however a lure. And he turned out to be proper. The S&P 500 ended up sinking roughly 20% in 2022, ending the yr at 3,839—removed from Wall Road’s lofty 4,800 common forecast.

Now, with latest U.S. financial information rising the hopes for a “comfortable touchdown”—the place inflation is tamed with out sparking a recession—the strategist says buyers are repeating the identical previous errors. The S&P 500 has jumped greater than 5% yr up to now amid fading inflation and recession fears, however Wilson believes company earnings are nonetheless set to take a success, making the rise simply one other bear market rally.

“The ultimate phases of the bear market are all the time the trickiest, and we’ve got been on excessive alert for such head fakes,” he wrote in a Sunday analysis word. “Suffice it to say, we're not biting on this latest rally as a result of our work and course of are so convincingly bearish on earnings.”

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