US stocks rebounded following the US Federal Reserve (Fed) announced a 3-yard rate hike in its latest meeting. Still, Morgan Stanley urged investors not to rush money into the stock market, calling it a “trap.”
Mike Wilson, chief U.S. strategist and chief investment officer at Morgan Stanley, said Wall Street’s belief that the pace of rate hikes might slow faster than expected is premature and problematic.
Once the Fed stops raising rates, there will always be a rebound in the market until the recession starts, Wilson said. However, this time, the time gap between the end of the Fed’s rate hikes and the recession may not be too long, which will be a trap.
The most pressing issue, Wilson said, is the impact of a slowing economy and excessive Fed tightening on corporate earnings and earnings. “The market is a bit stronger than thought given that growth signals have been negative. But even the bond market is now starting to accept that the Fed’s actions might go further and push us into a recession,” Wilson said. .
Wilson’s year-end price target of 3,900 for the S&P 500 is one of the lowest on Wall Street and suggests the index has room to fall 3% from Wednesday’s close and up from January’s close. points fell 19%.
“We’re getting close to the end,” Wilson said. “I mean this bear market has been going on for a while, but we still have one last wave, and I don’t think the June low is the last wave.” Wilson believes that in a recession, The S&P 500 might fall to 3,000 at its worst this year.
