Morgan Stanley reminded investors not to fight the Fed, while JPMorgan recommends traders fade the rally as recession risks remain high.
amid signs of a deterioration in corporate earnings and the health of the global economy.
In fact, the broker labelled the rally another bear market trap, fuelled by investors abandoning their fundamental discipline for fear of falling behind the market’s performance or simply missing out on gains.raise its benchmark federal funds rate by an expected 0.25 percentage points “A Fed pause is undoubtedly worth some lift to stocks but once again we want to remind readers that both bonds and stocks have rallied already on that conclusion,” Mr Wilson said. “That was the call in October, not today.”
“It’s important to note that typically when forward earnings growth goes negative, the Fed is actually cutting rates,” Mr Wilson said. “That’s not the case this time around... an additional headwind for equities.”JPMorgan also advised investors to sell the new year rally in stocks because the risk of a recession remains high, even though the timing of its arrival has been postponed due to tightness in the US labour market.
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