Morgan Stanley Predicts Stock Market Sell-Off Within Next Few Months
One of President Trump’s claims to Presidential success is the roaring stock market. While some financial experts have credited Obama’s prior administration with the credit, others have noted the Fed’s lower interest rates as well as investor confidence under Trump economics. The question now looms, is there a stock downturn on the horizon?
Investment Bank Morgan Stanley believes that the hot economy is running a little too hot and will soon cool off, leaving many investors holding the bag.
Here’s what Morgan Stanley had to say:
“With Amazon’s strong quarter out of the way, and a very strong 2Q GDP number on the tape, investors were finally faced with the proverbial question of ’what do I have to look forward to now?’ The selling started slowly, built steadily, and left the biggest winners of the year down the most. The bottom line for us is that we think the selling has just begun and this correction will be biggest since the one we experienced in February,”
Morgan Stanley specifically warns those invested heavily in the tech sector and small cap funds.
Back in February, both the Dow Jones and S&P 500 went through a correction phase after a surprisingly good jobs report was released to the public. The S&P has officially recovered, and then some, since February, though the Dow Jones remains within the 10% pull-back number from the original apex.
Both Netflix and Facebook have struggled to maintain their high share price points. Facebook alone lost $130 billion of its value after EU profile numbers were much lower than expected. Amazon, on the other hand, jumped 4% after releasing their earnings report last Thursday after the bell.
Recently, Warren Buffet’s famous ‘Buffet Indicator’ sent signals of an impending stock market crash, as well, furthering the legitimacy of conspiracy arguments that a big crash looms.
Oddly, some of Trump’s successes, such as improved job reports, have contributed to the heightened state of the stock market. In the financial world, every action has a reaction, making it impossible for the economy to truly run unscathed at every facet. That’s basic economics that we’ve learned to expect.
The “Trump economy,” as people are calling it, will be a vital campaign talking point during both midterms and the 2020 Presidential election. In fact, along with border security, the hot economy is one of Trump’s strongest campaign talking points. If the economy, or stocks, were to take a dramatic hit around November’s primary, or just prior to the 2020 Presidential election, it could serve as a huge hit to the Republican’s ambitions of maintaining complete control of the Presidency, the House, and less likely, the Senate.
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Strategically, Democrats would be thrilled for an economic downturn to coincide with elections, particularly November’s critical primaries.
In any case, prepping for a potential stock market crash is always imperative. Unless you are in the stock market for the long haul, your money is always in perpetual risk. Many people who have purchase marijuana stocks have felt the wrath of a major correction that began last December. Corrections and crashes happen, if you are invested in riskier profiles, you are likely to feel the brunt of these effects.
Investing long-term in S&P 500 ETFs, Vanguard mutual funds, and REITs, will always serve to help you absorb the impact of a major crash in much better fashion.
It is important to note that journalists from major publications will often predict economic and stock market crashes recklessly. Take John Hussman, a writer for Business Insider, who three days ago predicted the next stock market crash upon us. The problem is, Hussman has been predicting such a fate since 2012. Eventually, he will be right, but that’s what he’s banking on.
Preparation is the key to survival, including financial survival. Fear mongering will always exist and eventually such fear mongering will turn out to be correct. That’s just the way things work.
Photo by JiahuiH
Author: Jim Satney
PrepForThat’s Editor and lead writer for political, survival, and weather categories.