Wall Street giants sound alarms and warn of a stock market crash
More and more people are saying that the steady rise in US stock prices will stop. Goldman Sachs, Morgan Stanley, and Citigroup strategists have all sent out new messages about how bad shocks could end the winning streak.
As a result of the pandemic, the spread of the delta form of the Corona virus, the return of weak global growth, and the central bank’s decision to end stimulus programs, strategists have come up with new ways to look at the stock market. All of these things come with risks.
“The market is more fragile now that prices are higher,” said Christian Mueller-Glesman, managing head of portfolio strategy and asset allocation at Goldman Sachs. “If something new and bad happens, it can cause growth shocks that lower the risks quickly.”
Since the S&P 500 did better than short bets by about 10 to 1, people who are long are becoming very bullish. When the index falls 2.2%, it is likely that half of these bets will lose money.
Citigroup analysts led by Chris Montagu have warned that even a small drop in prices could be made worse by the need to close open margin positions.
At the same time, Morgan Stanley lowered the relative weight of US stocks compared to global stocks on Tuesday, citing “major risks” to growth through October. Credit Suisse Group, on the other hand, said it had a small devaluation of US stocks because of things like high prices and regulation risks.
Even though no one thinks there will be a big selloff, investors are too tense and open to any sign of bad news after the stock market crash.
The S&P 500 has been going up for seven months in a row, which is the longest streak since January 2018. Many people think the stock is about to go down in September.
Bloomberg’s Andrew Sheets, a strategic analyst for wealth management, said, “We will have a time in which data will be weak in September while the risks of variable delta and school reopening are high.” “Market prices are not changed if the report stays weak.” The same as in other parts of the business.
Most people think that small buyers are to blame for the recent gains. JPMorgan says that they put almost $30 billion in cash into US stocks and ETFs in July and August, which was the best two months in a row. As long as it is easy, they can also be the base that keeps the market strong.
“Retail investors have been buying stocks and equity funds at such a steady and robust pace that a correction in stocks seems highly unlikely,” Nikolaos Panigertzoglou and other global analysts at JPMorgan wrote in a note on September 18. “It remains to be seen whether the upcoming change in Federal Reserve policy will cause individual buyers to change how they feel about stocks,” he said.
In the end, policymakers at the Federal Reserve and the European Central Bank will put these views to the test because they are planning to cut back on their asset purchase plans. Also, traders do not think they will hear anything about a Fed policy slowdown until at least November. They have also ruled out a rate hike, but it was not long ago that rate hikes stopped another wild bull market in 2018.
An study by Bloomberg Intelligence found that momentum and volatility show that institutions are overheating, which is another sign of a pullback.
In a note to Lisa Chalet, chief investment officer of Morgan Stanley Asset Management, he said, “The problem is that the markets are viewed as perfect while they are fragile. This is especially true since there has not been a correction of more than 10% since the March 2020 low.”
His writing showed that the Global Investment Committee of the bank thinks the stock market will fall by 10% to 15% before the end of the year.
It was also said that the strength of the big US equity indices in August and early September, when they hit new daily highs despite worrying events, was no longer a good sign. profits in index funds. Equity indices did not take into account the return of the Corona virus, the drop in buyer confidence, the rise in interest rates, or major changes in geopolitics.
