Last night (Wed) the Federal Reserve announced another increase in the interest rate in the US, hinting that the desired goal of stopping the increases is in the foreseeable future. As a result, the markets recorded sharp jumps and scattered cautious optimism into the air. However, Mike Wilson, the American stock strategist and manager The chief investment officer of the investment bank, Morgan Stanley, says that he believes that Wall Street’s excitement over the idea that interest rate hikes may slow down sooner than expected is premature and problematic.
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“The market always soars as soon as the Fed stops raising until the recession starts. … [אבל] It is unlikely that there will be a large gap this time between the end of the Fed’s rate hike campaign and the recession,” Wilson told CNBC this week. “Ultimately, it will be a trap.” According to Wilson, the most pressing issues are the impact the economic slowdown will have on corporate earnings and the risk of tightening Fed surplus.
“The market was a bit stronger than expected, given that growth signals have been consistently negative,” he said. “Even the bond market is now beginning to be convinced of the fact that the Fed is probably going too far and will lead us into a recession.”
“We’re getting close to the end. I mean the bear market has been going on for a while,” Wilson said. “But the problem is that it won’t stop, and we have to get this final move, and I don’t think the June slump is the final move.” Wilson believes the S&P 500 could fall as low as 3,000 in a recession scenario in 2022.
“It’s really important to frame any investment in terms of ‘pros versus cons,'” he said. “There are many risks here on the way to getting everything that is left on the table. And in my eyes, this is not an investment.”
Wilson, who considers himself to have a conservative economic outlook, notes that he is in no rush to put money to work and is waiting until there are signs of a downturn in stocks. “We try to give customers a good reward relative to the risk. Right now, the risk-reward ratio, I’d say, is about 10 to 1 negative,” Wilson said. “It’s just not great.”