Morgan Stanley warns of correction

The uncertainty created by the US election campaign is also reshaping strategists’ forecasts for stock markets.

Morgan Stanley Chief U.S. Equity Strategist Mike Wilson said uncertainty has increased in the shadow of the presidential election, corporate balance sheets and Fed policy, and traders should be prepared for a serious pullback in stocks.

“I think there’s a pretty good chance of a 10 percent correction between now and the November election. The third quarter will be volatile,” Wilson warned on Bloomberg TV.

Stating that there is a 20 percent to 25 percent chance that share prices will end the year above today’s level, Wilson said, “The probability of a rise from now until the end of the year is lower than normal.”

With the expectation that the Fed will cut interest rates twice this year and the artificial intelligence rally, the S&P 500 index had risen 17 percent since January. The index closed last year at 24 percent plus. Wilson said the decline could also create opportunities for investors and said he focused on individual stocks instead of indices.

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