Morgan Stanley strategist Michael Wilson, one of the outspoken bears who accurately predicted the collapse of US stocks this year, said on Monday (31) that the Federal Reserve (Fed) rate hike is coming to an end.
Wilson wrote in the report that indicators, including the reversal of the 10-year and 3-year US Treasury yield curves, support the Fed to adjust policy sooner rather than later, so this week’s Fed meeting will have some effect. on the rally in US equities. Continuing, pausing or even completely ending is crucial.
“It is not uncommon for stocks to rise towards the end of the Fed rate hike cycle, so we think the Fed tightening is coming to an end,” Wilson said. He also expects companies’ earnings per share forecasts over the next 12 months. the rally will continue before a sharp pullback.
Morgan Stanley strategists esteem himS&P 500 IndexIt will rise to 4,150, up about 6% since Friday’s close, with stops set at 3,700. Wilson said last week that the bear market in US equities could end in the first quarter of next year.
Additionally, Goldman Sachs strategists provided a similar explanation for the previous equity market rally, citing a possible slowdown in the Fed’s tightening pace, weak positions and bullish outlook for the fourth quarter as main reasons.
In 17 bear market rallies since 1970, the team led by Goldman Sachs strategist David Kostin saidS&P 500 IndexAverage gain of 15% in 44 days.
However, UBS disagrees with the two major Wall Street banks mentioned above, arguing that the current level of inflation in the US is still very high and the Fed is unlikely to adjust its policy target.
UBS strategist Mark Haefele said the Fed should continue to sharply raise interest rates until official data shows that inflation is waning and, even if the Fed eventually stops raising rates, it is likely. monetary policy remains at restrictive levels for some time.
All eyes of the market are now on the US central bank. The Fed is widely expected to raise interest rates by 3 yards (75 basis points) for the fourth time at its meeting this week, and will look at Fed Chairman Powell’s comments for clues about future monetary policy.
US equities rose last week as traders scanned economic indicators for signs of Fed tightening monetary policy, despite disappointing gains from big tech stocks over the past two weeks.
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