Morgan Stanley issues correction warning

The uncertainty created by the US election campaign is also reshaping strategists’ stock market forecasts. Morgan Stanley Chief US Equity Strategist Mike Wilson said that uncertainty has increased in the shadow of the presidential election, corporate balance sheets and Fed policy, and that traders should be prepared for a serious pullback in stocks. Speaking to Bloomberg TV, Wilson warned, “I think there is a very high probability of a 10 percent correction between now and the November election. The third quarter will be volatile.” Stating that the probability of stock prices finishing the year above today’s level is 20 percent to 25 percent, Wilson said, “The probability of an increase from now until the end of the year is lower than normal.” The S&P 500 index had risen 17 percent since January due to the expectation that the Fed would cut interest rates twice this year and the artificial intelligence rally. The index had closed last year with a 24 percent increase. Wilson stated that the decline could also create an opportunity for investors and said that he focused on individual stocks instead of indices.