Morgan Stanley’s Wilson Says S&P 500 Correction Nears End Stage

pxha[gsf50c16v2g}e9z4[ne_media_dl_1.png Morgan Stanley, BloombergArticle content(Bloomberg) — The S&P 500 correction is nearing its final stage even as the Iran war continues, according to strategists at Morgan Stanley, who warn that Federal Reserve interest-rate hikes still pose a threat to stocks.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThere is growing evidence that the equities slide “is getting closer to its ending stages,” the team led by Michael Wilson said, citing the example of previous “growth scares” that were not accompanied by a recession or rate hike. Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThe strategists note that over half of Russell 3000 stocks are down more than 20% from their 52-week highs. The S&P 500 forward price to earnings ratio has also dropped over 15%, suggesting that market pricing increasingly reflects risks posed by the Middle East war.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“We think the equity market is less complacent on growth risks than consensus believes,” the strategists said in a note Monday.Article contentThe S&P 500 has dropped 8.4% since Jan. 27. Stocks have been hit by fears over artificial intelligence and the war, which has effectively closed the Strait of Hormuz and severed a crucial route for global energy supplies. Brent crude reached $116.89 a barrel on Monday as additional US troops arrived in the Middle East and Iran-backed Houthi militants in Yemen entered the conflict.Article contentThe Morgan Stanley team said that markets have so far priced in higher energy costs. The increase in oil prices, compared to the prior year, is roughly half that of previous periods when an oil shock ended the business cycle, they argued. Positive earnings growth will also help protect against recession. Article contentArticle content“The market is saying the cumulative probability of the paths to resuming tanker flow in the Strait are much higher than the recession probability, and we agree,” the team wrote. Article contentREAD: Fed Officials Voice Growing Concern Over Fallout from Iran WarArticle contentStill, interest-rate hikes are a near-term risk for US stocks, according to the strategists. The sensitivity of equities to rates is close to the highest level of the past several years, they said. The 10-year Treasury yield is also closing in on 4.5%, a level which historically pressures stock valuations. Article content“Whether the move in yields today is being driven by inflation considerations, a more hawkish Fed or by deficit considerations from the war or both, we think it’s an important risk variable to consider,” the strategists said.Article contentTrending Oil Gains as Iran War Escalates With Houthi Attacks on Israel PMN Business Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas A 35-Year-Old Crypto Bro Helped Pakistan Win Over Trump World PMN Business Iran's Attacks on Mideast Aluminum Plants Threaten Supply Crisis PMN Business Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Oil Gains as Iran War Escalates With Houthi Attacks on Israel PMN Business Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas A 35-Year-Old Crypto Bro Helped Pakistan Win Over Trump World PMN Business Iran's Attacks on Mideast Aluminum Plants Threaten Supply Crisis PMN Business Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles