This story requires our BI Prime membership. To read the full article,Mike Wilson, Morgan Stanley's chief US equity strategist, says the recent US-China "trade truce" doesn't change the direction of the economy and could set the market up for failure.
He adds that the rally last week upended some of the market's recent leaders, and that trend would also hurt equities if it lasts. Investors badly want a US-China trade deal. But Mike Wilson, the chief US equity strategist at Morgan Stanley, says the recentWilson argues he's seen this movie before, and that it ends with a big market sell-off. That's what happened in December 2018, when theSoon after, global stocks plunged as investors feared a recession was imminent.
"We fail to see any meaningful impact on the real economy in the near term," Wilson wrote in a recent client note. "Without a significant rollback of existing tariffs, we don't see how a 'mini-deal' will change the currently negative trajectory of growth in both the economy and earnings." The biggest winners Friday, he notes, were cyclical and short-term momentum stocks, which investors have been neglecting. Wilson says that hurt the relative performance of a lot of funds, and if they're forced to adjust to changes in market leadership, they'll hesitate to buy.
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