Morgan Stanley Predicts Bull Market End

Published on: 17 May, 2018

It is Morgan Stanley (NYSE: MS) prediction that stocks may rally for one more time during summer 2018 prior to hitting an all-time high in the latter months. The company cited a number of positives which are fast degenerating into negatives. Inflation has picked up and the economic growth of the world is predicted to decelerate. Tariffs and not tax cuts are now loved by Washington. There is more than a possibility of an interest rate rise by Federal Reserve. Andrew Sheets, the Investment Bank's cross-asset strategy head, considers it as a fundamental shift.

Records show that the bull market started in March 2009. The run is the second longest as of now. There has been a quadrupling of the S&P 500 from the time it bottomed out at 666. This happened during Grey Recession. It seemed to observers that the stock market only went up in the period between the latter part of 2016 and the beginning of 2018. Just after Donald Trump became the President of the United States, the Dow went north from 18,333 and reached a new peak of 26,616 in the latter part of January. The stocks then tanked fearing trade wars and inflation. The Dow at present is approximately 2,000 points down below the exchange's historical highs. Everyone on Wall Street has the same question in mind- “Is the bull market about to end?”

Morgan Stanley supposedly has the answer. It had argued that the market is in the middle of “topping process”. The process involves corporate borrowing going up to its highest levels, and then the bond yields follow suit. The stocks bring up the rear end. Sheets opined that corporate credit markets hit the peak during the latter part of January. A quick peruse through financial history shows the stock market repeats the performance within a space of 12 months. He pointed out that stock market will, in all probability, peak anytime within the third or the fourth quarter. He surmised that 2018 will witness a number of rolling tops. He added that the choppy beginning to the year cannot be termed an aberration.

Morgan Stanley managers are not the only ones who have adopted a more cautious outlook towards stocks. Approximately 60 percent of the fund managers polled during early May believe stocks either went up to their maximum value in January or will do the same in the latter part of 2018.

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Danny Abramov

Email: danny@financialinsiders.com

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