Anticipation of a rebound in the traditional stock and crypto market might get an unexpected hit from Morgan Stanley’s warning
Following the widespread selloff that started earlier in the month of May, the stock market saw a bounce back last week. But the chances of assets and markets continuing their ongoing rally might see a break amidst the drastically high inflation and consistently growing hawkish actions of the Federal Reserves. These circumstances continuously minimize the hopes of a market rebound.
Analysts at Morgan Stanley have similar thoughts about the same where they shared in a note that the relief from the rally in the stock market has only a limited scope to go further until the involved risks in its ways begin to fade.
One of the Analysts who led the note, Michael Wilson, said that the strength of the market during last week would prove to be another rally of the market but towards the bearish trend at the end. The important factor of fundamental calls is that the analysts are focusing on a slowing growth now, and in their view, the estimates of the earnings are too high.
As Wilson explained in his note, he sees that the S&P 500 is soaring to a maximum height of 4,300 points amidst the ongoing rally, which is about a 10% rise in a week. The index is up by 3.4% from its close on Friday, which is just above the bear market threshold before closing the market.
However, Wilson expects the rally to be short-lived, where the S&P will be trading at nearly 3,400 by the second-quarter earning season’s end that would be in mid August. If that happens, then it would drop by 18% from its current levels, and the same mark could be at least a 29% decline from what it was at the beginning of 2022.
Further, it showed that the primary reason for particularity in this rally, way beyond being just an oversold bounce, is that the Federal Reserve may be examining its pause in September. Wilson also wanted the inflation expected to remain sky-high as per the Feds and the pivot inflation, which might be hoping for the same.
The fears are visible on Wall Street, considering the Fed may unintentionally trigger a recession-like situation on its way to fight inflation that by the April month soared upto 8.3%, which is nearly a 40-year high.
Source: https://www.thecoinrepublic.com/2022/06/01/why-does-morgan-stanley-think-that-the-rally-in-the-crypto-market-would-be-for-a-short-time/