Investors have"very few places to hide" in markets right now, with even defensive stocks succumbing to the pressure in recent days, Morgan Stanley equity strategists led by Mike Wilson wrote on Monday."The market has been so picked over at this point, it's not clear where the next rotation lies," Wilson wrote."In our experience, when that happens, it usually means the overall index is about to fall sharply with almost all stocks falling in unison.
Read MoreThe S&P 500, the broadest gauge of US stocks, has been in a bull market since late March 2020 when the Federal Reserve came to the rescue with unprecedented support amid the deep recession caused by Covid-19. However, the Nasdaq tumbled into a bear market in early March as oil prices skyrocketed and inflation fears mounted.Morgan Stanley said investors are buying into the bank's fire-and-ice narrative of an overheating market and economy that get dramatically cooled off.
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