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Business

Morgan Stanley warns last week’s stock bounce was ‘vicious bear market rally’

By
Lydia Moynihan
Published March 21, 2022, 11:09 a.m. ET

Morgan Stanley’s chief investment officer warned that last week’s stock-market surge was an economic calm before the storm — and that investors should take the opportunity to sell.

In a note to clients, Mike Wilson — who is also the firm’s Chief US Equity Strategist and Chair of the Global Investment Committee — said last week’s brief bump in stock prices was “nothing more than a vicious bear market rally,” according to a copy of the report obtained by The Post.

Wilson suggested in his note late last week that the US is nearing the end of a “late-cycle expansion phase,” or the conclusion of a growth cycle that comes right before a contraction.

“While it may not be completely finished, it is a rally to sell.” Wilson said. “Bear market rallies are the most vicious.”

And he encouraged investors to take a “defensive” strategy when it comes to investing. The equities team recommended buying utilities stocks which they believe will outperform in future.

morgan stanley cio
Mike Wilson suggested in his note the U.S. is nearing the end of a “late-cycle expansion phase.” Bloomberg via Getty Images

The note comes after the S&P concluded its best week since 2020 — gaining 6.2% in a single week. Still, the index has slumped roughly 6% this year and Morgan Stanley analysts in Europe dropped their expectations for the index from 10% to 3% this year.

And even as the Federal Reserve raised rates last week and indicated a tighter stance on monetary policy, inflation continues to skyrocket. In February, the pace of inflation hit a four-decade high. Other global pressures like Russia’s invasion of Ukraine are causing uncertainty in markets as well.

The Dow Jones Industrial Average on Monday was recently off 176.56 points, or 0.51%, at 34,578.37. The S&P 500 was off 0.2 percent at 4,454.95. The Nasdaq was off 0.8 percent at 13,778.24.