Tags: Morgan | Stanley | Rally | Over | Stocks | Down

Morgan Stanley: Rally Over, Stocks Headed Down 11 Percent

Monday, 12 Apr 2010 08:53 AM

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Morgan Stanley analyst Teun Draaisma recommends that investors use “tactical caution” for the next three to six months.

The European equity analyst called for investors to sell stocks in June 2007 when the markets were flashing a “full house sell” signal. He then flipped bullish in November of 2008 as the markets were pricing in a much more severe situation than Draaisma saw unfolding.

“We recommend selling into strength, and we think MSCI Europe will reach 1,030 at some point later in 2010, down 11 percent from here,” Draaisma writes in a note to investors.

"The last 12 months have been characterized by record stimulus and rising economic leading indicators,” Draaisma says, adding that Morgan Stanley reduced its equity exposure two months ago.

Fresh signs that the economy continues to recover sent the Dow Jones industrial average briefly above 11,000 Friday for the first time in 18 months.

Draaisma’s thesis is that good growth will lead to tightening measures and struggling equity markets this year, just like in 1994 and 2004.

He believes the next six months will be characterized by some stimulus withdrawal as a reaction to good growth in Asia and the United States, and softening leading indicators.

The recent rally was larger than Morgan Stanley expected, and Draaisma believes it was due in part to the Fed’s refusal to tighten the money supply.

”Sentiment had turned quite cautious in early February,” he says. Nevertheless, we do think the market peak associated with the start of tightening is near, and expect 2010 to show a volatile whipsaw pattern in equities.”

The Dow hadn't crossed that level since Sept. 29, 2008, just as the worst phase of the financial crisis was beginning.

The Dow very briefly traded over 11,000 in the final five minutes of trading before settling slightly lower. The Dow had come within 12 points on both Monday and Tuesday.

The Dow rose 70.28, or 0.6 percent, to close at 10,997.35. The Standard & Poor's 500 index climbed 7.93, or 0.7 percent, to 1,194.37. The Nasdaq composite index rose 17.24, or 0.7 percent, to 2,454.05.

The Dow is now up 68 percent from a 12-year low of 6,547.05 on March 9, 2009. It's still down 22 percent from its October 2007 peak of 14,164.53.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Bill Would Limit Transfer of Military Gear to Police

Tuesday, 16 Sep 2014 22:30 PM

Two members of Congress are trying to stop the military from arming local police forces with high-caliber weapons, grena . . .

Average American Woman's Waistline Grows to 39 Inches: CDC

Tuesday, 16 Sep 2014 16:40 PM

Americans' belt size continues to inch up, and women's waistlines are widening faster than men's, according to new gover . . .

Union Appeals Rice's Indefinite Suspension by NFL

Tuesday, 16 Sep 2014 22:08 PM

The NFL players' union appealed Ray Rice's indefinite suspension Tuesday night.Rice was originally handed a two-game sus . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved