Author Topic: Stocks likely headed for a 10% pullback in the third quarter, Morgan Stanley’s Wilson warns  (Read 1087 times)

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Offline libertybele

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Stocks likely headed for a 10% pullback in the third quarter, Morgan Stanley’s Wilson warns

Investors should start preparing for a stock-market correction as uncertainty surrounding U.S. politics, corporate earnings and Federal Reserve policy starts to weigh on the market, according to Morgan Stanley’s Michael Wilson.

“The chance of a 10% correction is highly likely between now and the election,” Wilson said. “Not because of the election but because uncertainty is likely to prevail,” Wilson said during an interview with Bloomberg Television on Monday.

See: Why stocks could see a 10% pullback later this year

Equity investors have managed to ignore these risks so far, Wilson said. Their solution for tepid earnings growth exhibited by most companies has been to bet on a handful of high-quality growth stocks that have seen profits boom over the past year.

While the strategy has generally worked, investors eventually will be forced to reckon with the possibility that the “bad news is good news” economic dynamic that has recently helped to prop up stocks could ultimately come back to bite them.

Uncertainty surrounding the outlook for monetary policy and the election could also drive the market lower in the coming months. Wilson pegged the chances of the S&P 500 finishing the year at, or above, its current level is only about 25%.

The third quarter is going to be “choppy,” Wilson said. ..................
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