Top Wall Street strategists are divided over the impact of weak economic data on the US monetary policy outlook and what it means for equities.
Morgan Stanley’s strategist said it was too early to assume that US monetary authorities would stop tightening policies amid growing concerns about recession. He suggested that stocks still have room to fall before they bottom out. Meanwhile, JPMorgan Chase strategist said that inflation had peaked, leading to a policy shift in the US financial authorities and that stock prices would improve later this year.
Morgan Stanley’s Michael Wilson believes the hawkish stance of US financial authorities will be prolonged this time against the backdrop of persistent inflation. In the last four cycles, U.S. officials stopped tightening policies before the recession began, giving a bullish signal to equities, but recent historic inflation levels have been tightened by authorities as recessions arrive. He stated in the report that it means that there is a high possibility that he will continue.
“It’s always a bullish signal that US monetary authorities will eventually stop raising rates,” he said, adding that the stock market “may be ahead of it.” “The problem is that the timing of the hiatus may come too late this time,” he continued.
JP Morgan’s Miss Love Matika said in a report yesterday that severe momentum in activity and softening labor markets could pave the way for more balanced US monetary policy.
Monthly performance of S & P 500 types
Source: Bloomberg
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Morgan Stanley Sees More Fed Hikes While JPMorgan Expects Pivot(excerpt)