Morgan Stanley Reports U.S. Markets Are Now in a ‘Death Zone’
Feb. 27, 2023, 2022 (EIRNS)—In an analyst’s note, the chief U.S. equity strategist of Morgan Stanley investment bank, Mike Wilson, said that the current stock market run-up is like the “death zone” that mountain climbers experience when they reach an altitude so high they don’t have enough oxygen to breathe, RT reported today. “Many fatalities in high-altitude mountaineering have been caused by the death zone, either directly through loss of vital functions, or indirectly by wrong decisions made under stress or physical weakening that lead to accidents,” Wilson wrote.
“This is a perfect analogy for where equity investors find themselves today, and quite frankly, where they’ve been many times over the past decade,” he added.
“The bear market rally that began in October from reasonable prices and low expectations, has morphed into a speculative frenzy based on a Fed pause/pivot that isn’t coming,” Wilson wrote.
In other words, speculators convinced themselves that the Fed would be forced to stop their quantitative tightening policy and drop interest rates—which is not happening. Wilson predicts that the S&P 500 will drop to 3,000 points within months, down about 26% from current levels, and he adds: “It’s time to head back to base camp before the next guide down in earnings.”
The Fed has in fact been signaling that the rate increases will continue. The latest came from Fed Governor Philip Jefferson, who told a panel, according to Bloomberg: “The inflationary forces impinging on the U.S. economy at present represent a complex mixture of temporary and more long-lasting elements that defy simple, parsimonious explanation... The ongoing imbalance between the supply and demand for labor, combined with the large share of labor costs in the services sector, suggests that high inflation may come down only slowly.”
January inflation figures were higher than expected, with the CPI increasing by 5.4% year-on-year, “slashing hopes that the Fed may choose to stop its rate-hike campaign,” according to RT.