How Morgan Stanley Says Investors Should Prepare for a Slowdown

Morgan Stanley bearish on S&P 500

Morgan Stanley chief equity strategist Michael Wilson’s year-end target for the S&P 500 (SPY) is among the most bearish on Wall Street. His target is 2,750, which implies a downside of 2% from the index’s current level. Only Barclays has a similar target—the average target, as compiled by CNBC, is 2,950.

How Morgan Stanley Says Investors Should Prepare for a Slowdown

He believed stocks (VTI) (DIA) will continue to struggle this year. According to CNBC, Wilson wrote, “After a roller coaster ride in 2018 driven by tighter financial conditions and peaking growth, we expect another range-bound year driven by disappointing earnings and a Fed that pauses.”

Morgan Stanley on the yield curve and growth concerns

As reported by CNBC, Wilson said, “An inverted curve has implications for stocks, particularly given the fact we are now full on valuation.” He added, “In our view, lower rates are only good to a point because eventually the fall in rates is not just about the Fed giving equity investors a ‘green light’ to risk up, but it’s also about slowing growth.”

Slowdown concerns echoed by several companies

Concerns of slowing growth have been echoed by several companies. FedEx (FDX), BMW (BAMXF), and UBS have been warning of a global economic slowdown, particularly in China. US companies Apple (AAPL) and NVIDIA (NVDA) have also warned that China’s (FXI) slowdown is hurting their earnings.

Morgan Stanley recommends investors get defensive and buy stocks in utilities (XLU) and consumer staples. It also warns investors against consumer discretionary and technology stocks (QQQ).