Wall Street's top strategists say this year's stock market rally is probably over

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'That's another negative technical signal that the rally is exhausted,' Morgan Stanley's Mike Wilson said of the market after Nvidia's earnings.

"Remember, markets top on good news, and they bottom on bad news," Wilson said in an interview with Bloomberg. "I can't think of any better news then what we got from [Nvidia] on Wednesday...and we had a failed rally. That's another negative technical signal that the rally is exhausted. We're going to need a story to get people excited, and I don't know what that story is.

All year, a select few growth names have outperformed, but investors extrapolated that performance into the rest of the market, and it didn't make that much sense."We feel like when this rally began really in May around AI, we think it broadened out too much," Wilson said. "We're bullish on AI for the longer term, however in the near term, it's more of a cost, and there's going to be a big investment phase.

For the back half of 2023 Wilson said he's focused on how sustainable the narrative will be around the small batch of growth names, and whether hawkish central banks will weigh on those prospects. "I think that in these periods what happens is people's views get directed by price action in the market," he said. "They look for the market to tell them whether it's going to be a hard landing or not. The odds of a recession are still higher than normal. Price action dictates opinion — that's where we are, and if things continue to be weaker here then that narrative of a hard-landing could come back.

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