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 (FOMO). Many pundits have been shocked by the rise in stock markets in the U.S. given the U.S. bank crisis that saw three of the four largest bank collapses in history this year, the U.S. debt ceiling crisis and Yellen imposed X date on June 1 for a default by the U.S. Analysts and self-styled pundits have been horribly wrong. Markets were also meant to collapse in German and France. they have best seen record highs recently and the Japanese Nikkei has been on a tear.
Morgan Stanley Note Highlights
- “In short, we believe this rally will prove to be a head fake like last summer’s.”
- “Rather than a short squeeze the market was driven by the biggest winners as more market participants convinced themselves the next bull market may have begun and they can’t afford to miss it.”
- “There are many technical signals that conflict with the idea that this is the beginning of a new cyclical bull market—extreme narrowness (poor breadth), quality/defensive leadership, and broad cyclical underperformance”
- “Bottom line, from a technical standpoint, last week’s price action showed signs of panic buying, in our view.”
The S&P Hit Nine Month High Despite Negative Headlines
German DAX New All Time High
Japan’s Nikkei has almost doubled the S&P500’s YTD gain.
From The Traders Community News Desk
Source: TC, Morgan Stanley