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US Bank Morgan Stanley’s Monday note to clients called the recent rally on the equity market a head fake and driven by the fear of people missing out
[See the full post at: Morgan Stanley Calls U.S. Stock Market Rally a FOMO Head Fake]JPMorgan’s Kolanovic is even more bearish today:
Advises:
Trim allocation to stocks and corporate bonds
Up stake in cash by 2%
Rotate out of energy and into gold (citing haven demand and as a debt-ceiling hedge)Kolanovic’s main 3 reasons are:
The limbo for debt-ceiling negotiations
Elevated risk of recession
Hawkish Federal Reserve“Hopes of a swift resolution to the US debt ceiling have somewhat bolstered market sentiment”
Despite last week’s rebound, risk assets are failing to break out of this year’s ranges
Credit and commodities are trading at the lower end of this year’s ranges
Divergence remains between rates markets that expect the Fed to cut this year, equity markets that interpret those potential cuts as positive for risk, and the Fed’s more hawkish rhetoric
This gap is likely to close at the expense of equities
Rate cuts will likely only transpire from a risk-off event, and if rates stay higher they should weigh on equity multiples and economic activity
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