Re-opening US economy already priced in by Wall Street; Morgan Stanley downgrades small-caps

By Kshitij Bhargava5 days ago

Currently, markets are flooded with liquidity and benchmark indices are scaling fresh highs but valuations suggest the risk is elevated.

Stepping into the post-pandemic world, Wilson questions if there will be a demand slowdown as people get on with the normal lives. (Image: REUTERS)

With the US economy now re-opening and getting back to the old normal, Morgan Stanleys Chief U.S. Equity Strategist, Mike Wilson says he is now concerned about the risks that come with the move. Rather than getting excited about the reopening, we are getting a bit more concerned about execution risk and what’s already priced, Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist for Morgan Stanley said in a podcast. Morgan Stanley has downgraded small-caps and consumer discretionary stocks while recommending a move up on the quality curve.

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Mike Wilson said that the US economy could now be facing a supply problem and labour shortage, while also being cautious of demand. Although the shortage in supply shortage is limited to certain materials, it could still damage the recovery. This time not only are retail sales growth, but theyre growing at rates we have never witnessed before. In fact, on a cumulative basis, retail sales are above where they would have been had we just stayed on the same uptrend pre-COVID, he said.

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