Morgan Stanley: ‘Bear Market Rally’ Completed – Bond Turn

The recent rally in stock markets will prove short-lived, says US chief analyst Morgan Stanley, advising investors to seek refuge in bonds as economic growth slows.

In particular, in a note to the bank’s customers, the well-known for the wary positions of Michael Wilson, writes that “the bear market rally is over”. According to him, this “leaves us more positive in the short run against bonds than for stocks, as growth concerns return to the fore – hence we insist on a defensive stance”.

Wilson estimates that the economy is heading for a sharp slowdown due to “a drop in demand from last year with fiscal stimulus, a squeeze on demand from high prices, a spike in food prices and energy from the ongoing war.” as a tax, but also to increase stocks that are now in balance with demand. ”

Thus, the tighter macroeconomic environment will become increasingly difficult to ignore by investors, as it “cuts” corporate profits.

According to Bloomberg, despite concerns that the war in Ukraine and subsequent sanctions on a country at the heart of global supply of goods will further exacerbate record pressures on inflation, markets in both the US and Europe have recovered. March, balancing their quarterly losses.

However, Wilson and his team advise investors to “sell the rally”, claiming that he has “short legs”.

It is worth noting that this is a position that is in stark contrast to that of the JPMorgan team, which continues to underline the upward margin for shares, saying that growth concerns are excessive.

“Geopolitics remains wild, but we do not see the fundamentals of equity risk declining as much as it is fashionable to project at this stage,” said JPMorgan strategic analysts led by Mislav Matezka.

Characteristically, while Morgan Stanley’s Wilson insisted on his recommendation for defense stocks, Matetzka and his team say traditional defense elements “will not have long legs to recover beyond geopolitical developments”, advising on position underweight in them.

It is noteworthy, however, that Wilson was the analyst who had set the lowest target of the year for the S&P 500 index of those who had participated in a Bloomberg survey this year. He had expressed similarly negative assessments in 2021, which he later acknowledged to be “wrong”, amid the impressive rally that pushed key indicators to successive historical highs.