It looks like all of those Xmas presents you were planning to buy might need to be shelved for quite some time. According to Mike Wilson, analyst at Morgan Stanley, the end of cycle game is here, thanks to sharply rising interest rates. Moreover, he believes there is a consensus opinion of, get this, a republican sweep this November — which in turn would be both inflationary and bad for trade.
What in the fuck is he talking about?
Mike Wilson, equity strategist at Morgan Stanley, said in a note that the rise in interest rates has signaled the possibility for end-of-cycle risks, which would cap stock market gains and lead to intramarket rotations.
“We think this creates a tipping point that explains many of the performance themes this week and lays the groundwork for something of a regime change that is very much in line with our overall outlook for the S&P 500, as well as our style and sector recommendations,” Wilson wrote in a note.
Wilson has previously said that he believes a multiyear bear market is already here and stock market gains will be limited with the S&P 500 trading in a range of 2,400 to 3,000 over the next several years.
“Yields are rising but growth will likely slow next year, which means portfolios need to shift,” he wrote in a note.
“If the market begins to believe that a Republican sweep is likely to occur in the midterms, the likelihood of a tax cut extension, infrastructure spending and continued focus on trade protectionism all rise. We view these potential policy paths as inflationary and likely to add to the deficit, providing upward pressure on rates,” he wrote.
If you take a deep breath and grab a hold of your senses, you’ll see that rates haven’t gone anywhere for the past decade.
The idea of what Mike is trying to push is that rates are becoming too attractive for investors and with growth slowing, in spite of nothing pointing to growth slowing, investors will sell their FANG stocks and buy TLT. This is idiot tier thinking of the 33rd degree. Whenever markets dislocate and go lower, we get notes like this — telling us the end of days is here. In this case, however, end of cycle.If you enjoy the content at iBankCoin, please follow us on Twitter