U.S. investors are pricing in too much optimism in the stock market as strong market price action feeds into their views on the economic growth, which is...
U.S. investors are pricing in too much optimism in the stock market as this year’s rally feeds into their views on the economic growth which is weaker than expected, according to Michael Wilson, Morgan Stanley’s chief investment officer.
The Personal Consumption Expenditures index slowed considerably in the second quarter of 2023 and appears to be getting weaker based on recent commentary from numerous retailers and the recent rise in delinquencies, said Wilson. Morgan Stanley economists are now forecasting real PCE growth to fall into negative territory in the fourth quarter with nominal PCE growing just 1.3%.
See: Stock-market investors celebrate soft data. Here’s when bad economic news becomes bad news for Wall Street. The Russell 2000 RUT has risen 7.1% year to date, while the S&P 500 financials sector XX:SP500.40 has edged up 0.1% and the industrials sector XX:SP500.20 has gained 8.8% so far this year. These compare with a 34% year-to-date advance for the Nasdaq Composite COMP and a 17.3% gain for the S&P 500 SPX, according to FactSet data.
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