Need to Know: Morgan Stanley investment chief warns of oncoming 10% correction
As much of the U.S. gets ready to face a heatwave, the appetite is just as sizzling for stocks after Fed Vice Chairman Richard Clarida and New York Fed President John Williams revved up market expectations about rate cuts. Some backpedaling on those comments is cooling things off a little, but there’s still plenty of enthusiasm out there for equities.
One reason is that earnings estimates are still 5% to 10% too high, a factor which will weigh on stocks in the next 6 months, he says. Once those estimates come down, stocks will look a lot more attractive. One U.S. area he’s less keen on right now are growth stocks, which he sees as too crowded, along with defensive companies such as utilities and staples. Wilson expects a “rotation away from the high-growth stocks. If the economy improves next year as we expect, you won’t have to pay such a premium for growth.”The market Dow YMU19, +0.30% S&P ESU19, +0.16% and Nasdaq NQU19, +0.22% futures are higher.
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