Morgan Stanley Calls It: “We Are In A Bear Market”

Monday, November 19, 2018
By Paul Martin

by Tyler Durden
ZeroHedge.com
Mon, 11/19/2018

On Friday, with the Dow surging on what proved to be failed hopes that the trade war with China is coming to an end, JPMorgan head quant Marko Kolanovic quadrupled down on his now weekly call urging clients to buy the dip, this time saying that “equity market sentiment is held back by two key risks: the Fed hiking beyond the neutral rate and escalation of global trade war.”

To justify his relentless optimism, Kolanovic referred to “Trump’s statement that he may not need to impose more China tariffs and that the “China list is pretty complete, four or five things left off” (from the original list of 142 requests, i.e., 96% of items have been addressed)”and added that “naively interpreting the likelihood of a deal by the number of items addressed would indicate a significantly increased probability of a trade deal.” Of course, following this weekend’s collapse in Sino-US diplomacy at the APEC summit, which for the first time in history ended without a joint communique, we know that this is not the case.

The JPM quant also pointed to the recent shift in sentiment by the Fed’s chair and vice chair, and referring to the statement by Richard Clarida, suggested that “the Fed may stop at the neutral rate (rather than continue hiking beyond the neutral rate), which might be interpreted as an effective rate cut.” Then again, as Nomura’s Charlie McElligott explained this morning, the “bull steepening” in the curve indicates that far from a bullish resolution, the Fed’s dovish relent is actually bearish “because growth is decelerating, fiscal stimulus impacts are rapidly diminishing, financial conditions are net / net “tighter” and policy nearing the level where it is no-longer “stimulative.”

In any case, for the above two reasons, and along with record levels of Q4 buyback activity, Kolanovic concluded that “the pain trade, and therefore most likely outcome, will be the market going higher into year-end.”

Well, maybe not… because one look at the market which is down almost 2%, with the Dow plunging 450 points and the S&P back under 2,700 would indicate otherwise.

* * *

Meanwhile, taking the other side of the bet is Morgan Stanley’s bearish chief equity strategist, Michael Wilson, whose year end price target on the S&P is 2,750, the lowest of all Wall Street strategists whose average prediction is that the S&P will close above the record high of 2,930.75 hit in September and who warns again that “If it Looks like a Bear and Trades Like a Bear, Stop Trading it Like a Bull”, and then just in case he wasn’t clear, explains “We are in a Bear market.”

The Rest…HERE

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