Prepare for Stock Market Correction: Mike Wilson of Morgan Stanley Warns of Potential 10% Dip Before US Election
In a recent interview with Bloomberg, Mike Wilson of Morgan Stanley expressed concerns about the uncertainties surrounding the US presidential campaign, corporate earnings, and Federal Reserve policy. Wilson predicts a highly likely 10% correction in the stock market sometime between now and the election, citing a choppy third quarter ahead.
Despite the anticipation of the Fed cutting rates twice this year and the buzz around artificial intelligence, the stock market has seen a 17% increase this year following a 24% surge in 2023. Even Wilson, a long-time bear, has adjusted his stance in light of recent developments.
Although Wilson believes the chances of stock prices closing the year higher than they are now are low at 20% to 25%, he sees a potential pullback as an opportunity for investors to buy in. Valuations are currently "unexciting" following the S&P 500's double-digit gain this year.
Wilson recommends playing the stock market through individual stocks rather than indexes, focusing on high-quality growth names and overall quality. He notes that while momentum is expected to continue, the challenge lies in finding cheap shares in those categories. Wilson suggests that a 10% pullback could make these stocks more attractive.
In conclusion, investors should be cautious of a potential stock market correction in the near future, but also view it as an opportunity to invest in quality stocks at lower valuations. By following Wilson's advice and focusing on individual stocks with growth potential, investors can navigate the current market conditions and make informed decisions for their portfolios.