Morgan Stanley Chief Equity Strategist Mike Wilson on Monday has doubled down on his call for stocks to continue falling into the end of 2022 partly because of a shrinking supply of dollars in some of the world’s biggest economies.
Even with Monday’s rally, U.S. stocks likely will be headed lower for the foreseeable future, as volatility across equities, bonds, commodities and currencies could remain elevated, Wilson said, in a Monday client note. If this happens, the Fed will likely be called upon to reverse course on the aggressive monetary tightening it has promised to help counter inflation.
M2 for the “big four” economies: the U.S., China, the eurozone and Japan, peaked in March 2021, and thereafter, has decreased by $4 trillion, according to Wilson’s data. See: A rampaging U.S. dollar just booked its strongest quarter in at least 7 years as investors search for safety Fed Chair Jerome Powell has insisted that the Fed couldn’t risk cutting interest rates prematurely for fear that inflation might become even more entrenched.
Well, not today!