Investing.com – Morgan Stanley’s (NYSE:) chief strategist believes Wall Street’s rally has not been driven by strong stocks, and warns of a market upheaval and a crash.
“Don’t let the bear market fool you,” Morgan Stanley’s chief equity strategist, Mike Wilson, warned of the bear market hoax and said in a research note today.
The chief equity strategist at Morgan Stanley highlighted recent updates and challenges in the technology sector which has led to thousands of layoffs.
According to Mike Wilson’s forecast: “Four-quarter earnings don’t look good so investors should be wary of the ‘bear market’.”
The optimistic beginning
I am not tempted by the somewhat optimistic start to stocks for this year, Wilson said. Morgan Stanley’s chief strategist added: “Suffice it to say that we do not affect this recent rise, as the rise did not come as a result of real increases in profits and improvement in financial indicators.”
Low quality stocks
Wilson attributed the market rally to the fact that the rally in early 2023 was driven by heavily shorted lower-quality equities and a strong shift into cyclical stocks versus defensive ones.
Don’t be fooled.. fake height
Wilson warned that bear markets can fool many investors before anything is said and done, and they should continue to ignore the noise.
“The late stages of a bear market are always the hardest, and we have been on high alert for such fake highs, similar to the October-December rally we forecast earlier,” Wilson said.
We haven’t hit the bottom
Wilson believes that many investors are still fundamentally bearish, while some are wondering if we hit a bottom.-
“Our view remains unchanged as we expect the earnings trajectory in the US to disappoint current expectations and valuations,” says Wilson.--
Mike Wilson predicts an imminent profit recession, and said it will come as costs have risen faster than sales, and revenue has slowed unexpectedly for companies.
“Although we are not officially in a recession, the repercussions for businesses are already there, with lower sales leading to higher inventory volumes and lower productivity,” says Wilson.
Earlier, the chief equity strategist at Morgan Stanley, who correctly predicted the direction of the stock market sell-off in 2022, warned at the beginning of the year that the shock of the recession this year could lead to another 22% decline for the markets.
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