"Recent weeks have seen a sharp return of volatility to U.S. stock markets, with analysts at Morgan Stanley highlighting that a sudden escalation in the U.S.-China trade dispute has become the catalyst for the weakest index-level performance since the spring. Despite prior optimism for a deal following productive discussions at the APEC summit, talks have soured. On Friday, markets witnessed aggressive selling, especially in stocks with heavy exposure to China,"
"Wilson wrote on Monday that a correction was "overdue" because of stretched valuations, overly optimistic positioning, and an unfavorable season. "If we don't see near-term de-escalation, we think a larger than expected correction is likely," Wilson cautioned, pointing to the unwinding of crowded trades and defensive rotation as signs that institutional and retail investors are jittery. Wilson believes that, should the current trade fight persist into November, the S&P 500 could see declines of 10%-15%, with certain sectors hit even harder."
Mike Wilson, chief U.S. equity strategist at Morgan Stanley, warns a larger-than-expected correction is likely if U.S.-China trade tensions remain unresolved. Volatility has surged after a sudden escalation in the trade dispute, fueled by reports of China tightening rare earth mineral controls and a retaliatory 100% tariff from President Trump. Stretched valuations, overly optimistic positioning, and an unfavorable season increase market vulnerability. Crowded trades are unwinding and investors are rotating to defensive positions, signaling jitteriness among institutional and retail investors. Wilson projects the S&P 500 could decline 10%-15% if the conflict persists into November, with some sectors hit harder.
Read at Fortune
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