Investing.com – Morgan Stanley’s chief equity strategist has again warned the bank’s clients that the risk-reward for U.S. stocks is “extremely poor” at current prices.
Last week, it fell slightly, but it still sits comfortably above 4000 points. Morgan Stanley believes that the current profit expectations are still 10-20% high, so investors are advised not to chase up.
“While the recent data have opened the door for a soft landing, we think they also render the Fed’s pause/pivot completely pointless,” the strategists said. As a result, rates are rising across the curve, leading to equity More expensive than any time since 2007.”
Strategists were also puzzled by the rebound in growth stocks, which came “at a time when interest rates are rising again and the Fed has shown that the fight against inflation is not over.”
“False readings can occur when liquidity can be clouding fundamentals, and inconsistent stock and bond prices are a good example. The current environment is the most dangerous we’ve seen since the start of this bear market, and perhaps the strongest argument for that Evidence comes from our latest reading of the equity risk premium (ERP).”
Morgan Stanley’s ERP reading hit 155 basis points last week, suggesting “extreme risk,” with analysts calling the reading “unreasonable.”
[This article is from Yingwei Caiqing Investing.com, to read more, please log in to cn.investing.com or download Yingwei Caiqing App]
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Compiler: Liu Chuan