Morgan Stanley: It’s Time To Start Selling Again

Monday, January 14, 2019
By Paul Martin

by Tyler Durden
Mon, 01/14/2019

Heading into the end of the of 2018, Morgan Stanley’s chief equity strategist Michael Wilson – best known for his “rolling bear market” call and his accurate claim that BTFD no longer works – made a good, bearish call… Only in retrospect it was too good, and as Wilson writes this morning, while he had “always expected” the S&P 500 to hit his bear case of 2400, he thought it would be in 1Q 2019… not at the end of 2018 as “we thought the market would need to actually see the earnings and economic data disappointments before reaching 2400.

However, a confluence of exogenous events, including perceptions of Fed miscommunication, Government shut down, poor year end liquidity and most notably a furious hedge fund liquidation to meet redemption requests, “conspired” to take the stock market to valuations we hadn’t see since the post-Brexit reaction in 2016, culminating in what the press called the “Christmas Eve Massacre” (and we called the “Mnuchin Massacre”)and “conspired to create one of the worst Decembers in history”.

As a result, Wilson thinks the market embraced his earnings recession call as earnings revision breadth rolled over. In short, after ignoring Morgan Stanley’s bearishness for nearly a year the market is now discounting the bank’s (formerly) out of consensus views on growth and “it may have even discounted a modest economic recession.” Or, as Howard Marks summarized earlier on Monday, “Nothing much changed except people were first ignoring the bad news and then they were obsessing about the bad news.”

The Rest…HERE

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