Morgan Stanley’s Michael Wilson offered a prediction for stocks. For December, the analyst believes US stocks will head for a rocky start, thanks to volatile bond yields.
Ahead of the bullish “January effect,” interest rates and equities need to overcome the technical overbought levels. Wilson is ignoring the MACD momentum for the S&P 500 still in positive territory. The analyst said that markets bet many times on a Fed pivot. Despite interest rate cuts remaining high, markets have the most support this time on a pivot playing out.
Investors who fight the Fed are assuming a pivot along with a “healthy macro backdrop.” The Fed will remain ready to keep rates high for as long as it takes to lower inflation. Until that reaches 2.0%, a rate cut is a fantasy. Furthermore, a strong macro economy would invite inflation. The October inflation reports benefited from lower energy prices. After OPEC+ cut production, energy prices could rise.
Investors may take advantage of Exxon Mobil (XOM) falling from $120 in September to $102.99, Chevron (CVX) -11.86% in the quarter, and Conoco Phillips (COP) -5.18%. The hot economy would increase the oil demand.
For 2024, analysts have S&P 500 targets ranging from 4,200 to 5,500 or -8.5% to +19.7%. This optimism invites caution. Uncertainties in 2024 may escalate, giving markets a reason to take profits.
