Morgan Stanley strategist Wilson warns of risk to stocks as yields surge
Published On Jan 6, 2025, 5:14 AM
Morgan Stanley strategist Michael Wilson warns that U.S. equities could face significant challenges in the upcoming months due to rising Treasury yields, which are above 4.5%. This rise in yields, coupled with a strengthening dollar, raises concerns for stocks, especially those with international exposure. Wilson highlights the negative correlation between stock prices and bond yields, indicating potential volatility in the equity market. Although Morgan Stanley's team projects a growth target for the S&P 500 of about 9% over the next year, they caution that the market may be divided into two phases: a difficult first half and a potentially more favorable second half, influenced by various economic factors, including potential tax cuts and clearer tariff policies.
Stock Forecasts
SPY
Negative
As Treasury yields rise, equity markets generally face downward pressure, affecting both investor sentiment and stock valuations. The broad market may see continued decline as higher rates could reduce corporate earnings and economic growth prospects. Additionally, strength in the dollar may hinder the profits of multinational companies, leading to further stock price corrections. Investors should prepare for market volatility, especially in sectors heavily reliant on debt or affected by international trade.
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