Michael Wilson, chief U.S. equity strategist at Morgan Stanley, warns savvy investors to prepare for a quick 10% correction before giving way to a renewed rally.
Wilson and his fellow analysts, in a recent research report, say that either a host of risks that are building beneath the surface of the markets’ unimpeded uptrend — spiking COVID-19 cases, 2020 presidential election uncertainty and nearly unchecked government spending — must be cured or the recent technology-related winners need to fall along with the rest of the market, MarketWatch explained.
“We think the most likely outcome remains a 10% correction in the broader index led by the beneficiaries before the recovery and bull market continues,” wrote Wilson and strategists Adam Virgadamo, Andrew Pauker and Michelle Weaver.
“Once the correction is complete we expect the bull market to continue to broaden out and based on what we think will continue to be a surprising recovery in the economy and earnings later this year and into 2021,” the Morgan Stanley analysts wrote.
The Morgan Stanley warning is the latest in a series of caution signs for investors.
For his part, investment guru Jim Chanos recently predicted the seemingly endless soaring stock market is near the end. “Trouble’s coming, I don’t know when, but it’s coming,” the short-selling legend who just cashed in a roughly $100 million winning bet recently told the Financial Times.
Chanos just earned nine-figures by shorting Wirecard ahead of its collapse, according to sources cited in the FT story.
Chanos is a famed for helping to expose some of the most famous financial frauds, including Enron, Baldwin-United and Drexel Burnham. His firm, Kynikos Associates, just celebrated its 35th anniversary.
He claimed we’re in a “golden age of fraud,” describing the current market climate as rife with euphoria, investor fear of missing out and “post-truth” politics — “a really fertile field for people to play fast and loose with the truth, and for corporate wrongdoers to get away with it for a long time,” he said.
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