Morgan Stanley’s chief investment officer Mike Wilson on Bloomberg Wednesday issued a sobering warning on another day of record highs saying US stocks are overbought and risks a correction due to rising interest rates. He added bull markets tend to overshoot a little bit in the short term, any kind of pullbacks will probably be bought.
Morgan Stanley’s chief investment officer Mike Wilson on Bloomberg Wednesday issued a sobering warning on another day of record highs saying US stocks are overbought and risks a correction due to rising interest rates. He added bull markets tend to overshoot a little bit in the short term, any kind of pullbacks will probably be bought.
Key Takeaways from Morgan Stanley on Bloomberg Wednesday
- “The market is overbought and the market is probably a little bit overvalued quite frankly because interest rates now are finally starting to catch up,”
- “The risk in the market now is that as 10-year yields finally start catching up, we have a valuation reset because stocks are long duration assets, particularly the U.S. stock market, and that could create a bit of a correction.”
- The 10-year has jumped sharply this week to above 0.9%.
- “The market is overbought and the market is probably a little bit overvalued quite frankly because interest rates now are finally starting to catch up,”
- “The risk in the market now is that as 10-year yields finally start catching up, we have a valuation reset because stocks are long duration assets, particularly the U.S. stock market, and that could create a bit of a correction.”
- Argued that “corrections are normal in a bull market, and any dip in the stock market would be an opportunity for him to put additional capital to work.”
Note at the end of November Wilson forecasted that the S&P 500 could crack as much as 12% before the end of 2020 as the vaccine-driven rally runs out of steam. However the S&P 500 closed November at a record high as vaccine progress excited investors about an economic reopening.
Source: Bloomberg
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