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Growth slowdown to spark 10% stock plunge, Morgan Stanley warns


Investors might be playing with fire.

According to Morgan Stanley’s Mike Wilson, the S&P 500 is vulnerable to a 10% plunge despite Monday’s late buying binge. Investors are riskily downplaying the possibility of a collapsing Federal Reserve that is tightening and slower growth.

“This kind of action isn’t comforting. CNBC’s Chief U.S. Equity Strategist and chief Investment Officer, I do not believe that anyone will go home feeling confident even if it was the lowest low.”Fast Money.”

Wall Street hasn’t seen an intraday reversal this largeSince the 2008 financial crisis. The Nasdaq recovered from Monday’s 4% loss while the Dow dropped 3.25%. Blue chip index dropped 1,015 point at one stage. However, by the end of the day, it had recovered to 1,015 points. Nasdaq, Dow S&P 500All were positive.

Wilson, the market’s biggest bearAccording to him, the drop in earnings will occur within the next three-to four weeks. Investors should be aware of the potential for difficult earnings guidance and financial reports.

Wilson stated, “I require something lower than 4,000 in order to be really constructive.” I believe it’ll happen.

The strategy? Double down on defensive tradings in advance of any setback. He warns virtually every S&P 500 group will see more trouble due to frothiness and is making decisions on a stock by stock basis.

Because growth is slowing, we aren’t making big bets on cyclicals. “People got a bit too excited about these cyclical markets, and we believe that this is wrong-footed,” said he. He said that there would be a return in demand this year. Margins could prove to be an issue, according to us.

Wilson doesn’t believe investors can be comforted by Tuesday’s Federal Reserve policy meeting, which will begin on Tuesday.

Wilson stated that they are not planning to relent because of the recent market sell-off. They have not had enough data to make the right decisions. to stop the tightening process.”

On Monday, the S&P 500 closed at 4410.13, 8.5% below the index’s all-time high hit on Jan. 4. Wilson has set a 4,400 year-end price target.

CNBC’s Robert HumContributed to the report.