Michael Wilson, Morgan Stanley’s chief investment officer, sounding the warning on US stock prices again.
Summary points from a client note:
- Breadth remains weak for S&P 500 and Nasdaq
- AI beneficiaries continue to support
- US investors are pricing in too much optimism in the stock market
- economic growth is set to be weaker than expected
- “At current prices, markets are now expecting a meaningful re-acceleration in growth that we think is unlikely this year, especially for the consumer, which aligns with our economists’ forecast for slowing PCE growth”
- Personal Consumption Expenditures (PCE) index slowed considerably in the second quarter of 2023 and appears to be getting weaker
- “The rally in some of the major averages over the last few weeks may have investors feeling a bit better again but given the underlying weakness in breadth and in some of the more cyclical parts of the market, we think that optimism should be faded”