Morgan Stanley strategist Wilson says the S&P 500 correction is nearing its final stage
Importance
Level 1
- Correction driven by Middle East war-related risk repricing
- Forward P/E has compressed ~17%, in line with past non-recession growth scares
- The market has largely priced in the rise in oil prices
- Breadth is weak: >50% of Russell 3000 constituents down >20%
- Signals suggest the correction is closer to the end than the beginning
- The market is less complacent on growth risks than the investor consensus implies
- Key risk: rising yields — US 10yr nearing ~4.5%, a level that historically pressures equity valuations
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