Stocks will drop as the economy is either about to enter a recession or the Fed is poised to keep rates higher for longer, Morgan Stanley CIO says
Stocks are set to fall further, as investors realize the economy is either headed for a recession or the Federal Reserve is poised to keep interest rates higher for longer, according to Morgan Stanley's top stock strategist Mike Wilson.on Monday, Wilson pointed to recent upbeat sentiment in the stock market, likely because investors are expecting the Fed to cut interest rates later this year, all while maintaining expectations for further economic growth.
"We believe the equity market continues to expect the best of both worlds: interest rate cuts and durable growth," Wilson said."Instead, we believe another chapter of our fire-and-ice narrative is possible: in other words, a tighter Fed even as growth slows towards recession. This will be a difficult environment for stocks," he later warned., in which high inflation and the possibility of a recession will weigh on corporate earnings.
"If one is to believe our leading indicators that point to downward trends in earnings-per-share surprising margins in the coming months, stocks will likely follow that negative path lower," he added.
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