Morgan Stanley’s chief US fairness strategist Mike Wilson warns that markets are nonetheless in a bearish cycle and buyers are being fooled by a spike in liquidity.
In a brand new Bloomberg Tv interview, Wilson predicts that equities will end out the yr weaker than they’re buying and selling at in the present day attributable to antagonistic 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 buyers.
The Enterprise Customary reported in March that the FED’s Financial institution Time period Funding Program might 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 yr’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 fallacious method now once more. After which, after all, paradoxically, 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 predict these issues have conspired to drive the market.”
Wilson additionally says that the rise in market liquidity is basically evident on this yr’s robust efficiency of cryptocurrencies and tech shares.
Nonetheless, 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 yr.
“No one talks about the truth that crypto is up 60% this yr. After which the following one, after all, is the tech world. So that is what’s happening. We predict that the basic case doesn’t assist the place shares are buying and selling in the present day, 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 possibly downward within the index.”
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