Morgan Stanley’s top investment and equity strategists are warning that the recent stock market rally won’t last. They expect the market to remain volatile.
A Temporary Bounce?
According to Mike Wilson, the rally will likely fade as we move into May and June, giving way to a more sustained low later in the year. He doesn’t see this as a long-term positive trend.
Why the Market is Down
Wilson points to several fundamental factors driving the market downturn:
- Earnings Revisions: Company earnings forecasts have been revised downward.
- Federal Reserve Policy: The Fed’s halt to interest rate cuts is impacting the market.
- Government Regulations: Stricter immigration enforcement and other government actions are seen as negative for growth.
- Tariffs: Tariffs are the final piece of the puzzle, adding to the bearish sentiment.
He emphasizes that tariffs are not the primary cause of the market decline; rather, it’s the combination of these factors.
Trump’s Impact
Wilson also notes that President Trump’s apparent indifference towards the stock market has negatively affected investor confidence. The absence of a perceived “Trump put” (the idea that Trump would intervene to support the market) came as a surprise to many and contributed to the market’s decline.
The Bottom Line
The S&P 500 is currently down around 6% from its peak. Morgan Stanley’s prediction suggests investors should brace for continued volatility and a potential longer-term market correction.
