Said one of the biggest bears in the world Wall Street On Monday, the latest recovery in stock markets will be short-lived, and investors are advised to turn to bonds as economic growth slows.
“The bear market rally is over,” Morgan Stanley chief US equity strategist Michael Wilson wrote in a note to clients. “This leaves us more positive regarding bonds than stocks in the near term, with growth concerns taking center stage — hence our double down on defensive bias. “.
Wilson’s thesis is that the economy is heading towards a sharp slowdown, due to “the time to pay for the demand resulting from the fiscal stimulus programs from last year, and the high prices that will destroy a large part of the current demand, as well as the bill for food and energy prices, which has become the tax corresponding to the war.” . This less forgiving macroeconomic backdrop will become more difficult for investors to ignore, as it undermines corporate profits.
Despite fears that the war in Ukraine and ensuing sanctions targeting a mainstay of global commodity supplies will exacerbate record inflationary pressures, US and European stocks rebounded last month, paring their quarterly losses.
Wilson and his team advised investors to sell on the rise, as he does not see a rationale behind the rise.
The bearish view contrasts sharply with the team of rival investment bank JPMorgan, which has been consistently calling for further rally in equities, saying growth concerns are exaggerated.
“Geopolitical conditions remain wild, but we don’t see equity fundamentals from a return and risk perspective going as bearish as is currently the case,” JPMorgan strategists led by Mislav Matejka wrote in a note.
While Morgan Stanley’s Wilson doubled down on his recommendation for defensive stocks, Matejka and his colleagues said that there was no reason for conventional defensive stocks to continue to rise following the geopolitical dislocation, and he also recommended a reduction in weight.
