It’s no secret that the stock market has been volatile in recent months, but now Morgan Stanley strategists have warned that US stocks are in a “death zone” and could sink by as much as 26%. This news is concerning for investors, so let’s break down what it means and what you should do.
Kathy Entwistle, Managing Director at Morgan Stanley, and Mark Tepper, CEO of Strategic Wealth Partners discussed the January PPI release and the rise in home builder sentiment in relation to this news. Those two indicators suggest that inflation may be higher than the Federal Reserve anticipated when setting interest rates. Michael Wilson from Morgan Stanley noted that investors may not realize how much they are paying for stocks and Bank of America chief economist Michael Hartnett predicted a “no landing” scenario where there is no immediate slowdown in growth yet inflation remains above trend which could lead to S&P 500 dropping 7%.
JPMorgan strategist Mislav Matejka argued that equities will not hit bottom until Federal Reserve concludes its aggressive interest-rate hike campaign and starts cutting rates. In addition to that, he believes that investors should use any market pullbacks to increase their exposure to stocks. He also noted that long-term investors should consider investing more money into the markets if prices fall further.
Conclusion: The warnings from Morgan Stanley strategists are concerning but they don’t necessarily spell disaster for your investments. However, these recent predictions underline how important it is for investors to stay informed on all the latest developments so they can make smart decisions when it comes to managing their portfolios. Paying attention to news related to inflation and interest rates can help you decide when you should be buying or selling stocks to maximize your profits and minimize losses. Being aware of all potential risks can help you protect your money in an uncertain market.