Morgan Stanley’s chief investment officer just issued a warning about asset markets that he believes could end up being a fantastic entry point for bulls.
In a new interview on the Master Investor Podcast With Wilfred Frost, Morgan Stanley’s Mike Wilson says liquidity constraints, potentially triggered by a slow-moving Federal Reserve, could cause issues as the year comes to a close.
However, the veteran trader says that should a major year-end correction hit, a market resurgence will take place, with a “broadening out” – or a shift from large caps to small caps – likely to occur.
“We’ve had a view [since] May, where we have published targets of 7,200 for the S&P 500, but [also a] rotational call once again, where we see broader participation. We’ll be publishing our year-end outlook shortly…
Generally, we have a very constructive view for the next 12 months. What I will tell you, is on this liquidity front, and perhaps the backend getting a little wobbly, that is probably my number one concern in the very short term, which is that around year end liquidity constraints and the fact that the Fed is moving slower than I think they should be, on not only rate cuts but on balance sheet expansion, there may be a bit of a wobble in the short term, and that’ll be a tremendous opportunity to add risk, probably going into the first quarter.
And that will be the catalyst to get the Fed to do what I think they should be doing, which is cutting rates and adding more liquidity, which will help that broadening out story that I’ve talked about.”