According to Morgan Stanley Strategist Michael Wilson, the increasing sensitivity to US stocks is at odds with weakening economic data and benefits.
Wilson warned that the decline in forward-looking indicators will turn into calm in profits and eventually affect US markets negatively. Saying that a less hawkish Fed, a reopening of China and a weaker dollar are already priced in, Wilson said this is the latest optimism in the markets.
“The question is, when will stock indices price the current weakness in leading information and the definitive weakness in concrete information?” Wilson wrote.
Wilson’s view serves as a warning sign after the S&P 500 index has rebounded in the wake of last year’s bear market, rising nearly 11 percent since mid-October.
Corporate profits are also a source of worry for JPMorgan Strategist Mislav Matejka. Matejka said the environment will be quite challenging this year as margins are close to record levels in the US and Europe.
“Even if companies do not disappoint for the fourth quarter of 2022, we do not believe earnings per share will rise in the first half of this year,” Matejka wrote in his note.
