Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

'The Year of the Fed': Morgan Stanley Says Growth Will Disappoint, Urges Investors to Stay Defensive

Published 04/11/2022, 09:24 PM
Updated 04/11/2022, 09:24 PM
© Reuters.

© Reuters.

Morgan Stanley’s top strategist Micheal Wilson has once again urged investors to stay defensively positioned as the Q1 earnings season will show the growth deceleration.

Wilson believes that the stock market is sending a clear message to traders: Stay defensive as growth will disappoint. The strategist added that we are facing “a pivotal earnings season.”

“The internal message from stocks is diverging again from bonds and the S&P 500. When that happens we think it pays to follow stocks. Our main takeaway is to stay defensive and be wary of what bonds are really saying about growth. The move looks more technical at this point which tends to exhaust and reverse quickly. Cyclicals look most vulnerable to such a reversal if it happens,” Wilson said in a client note.

On why the S&P 500 is trading less than 10% off the all-time high despite an extremely challenging macro environment, Wilson says that mis-priced yields helped the index to “remain resilient” after ignoring “the growing risk of a more hawkish Fed in the fourth quarter of 2021.”

Wilson argues that the stock market is “the best strategist in the world.”

“On that score, the internals of the stock market are once again diverging from the message from the bond market. More specifically, back end rates have had one of it's largest 1 month moves in history as Fed funds futures catch up to reality. To be clear, we don't have a bone to pick with this move higher in rates given the state of inflation and the Fed's persistent attempt to convince the world they are going to do whatever it takes to quash it. However, we do question the bond market's apparent view that the Fed can do this much tightening without impacting the economy in such a way that this path for rate hikes will be challenging to complete,” the strategist added.

By Senad Karaahmetovic

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.