Morgan Stanley Strategist Issues Macro Warning to Traders, Says Investors Are Being Fooled by Rise in Liquidity
Morgan Stanley’s chief US fairness strategist Mike Wilson warns that markets are nonetheless in a bearish cycle and traders are being fooled by a spike in liquidity.
In a brand new Bloomberg Tv interview, Wilson predicts that equities will end out the 12 months weaker than they’re buying and selling at right this moment on account of adversarial macroeconomic fundamentals.
He says an injection of latest liquidity from the Federal Reserve’s emergency mortgage program established to rescue collapsing banks is propping up the markets and deceptive traders.
The Enterprise Commonplace reported in March that the FED’s Financial institution Time period Funding Program may inject as a lot as $2 trillion into the US banking system to ease the liquidity crunch.
Says Wilson,
“We predict the overriding driver of this 12 months’s rally has been elevated liquidity. Liquidity has improved dramatically, each on a world scale, and a weaker greenback has helped, that’s going the unsuitable manner now once more. After which, in fact, sarcastically, the banking failures that occurred in March led to an injection of liquidity from the FDIC (Federal Deposit Insurance coverage Company) and the Fed. And we expect these issues have conspired to drive the market.”
Wilson additionally says that the rise in market liquidity is essentially evident on this 12 months’s sturdy efficiency of cryptocurrencies and tech shares.
Nevertheless, he doesn’t imagine that the market fundamentals are there to assist a continued rally, and he predicts a market dip to complete out the second half of the 12 months.
“No person talks about the truth that crypto is up 60% this 12 months. After which the subsequent one, in fact, is the tech world. So that is what’s happening. We predict that the elemental case doesn’t assist the place shares are buying and selling right this moment, whether or not it’s on the index stage or the one inventory stage and the second half goes to be a bit choppier and doubtless downward within the index.”
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