Morgan Stanley’s Chief US Equity Strategist, Mike Stanley, has issued a cautionary warning to Wall Street investors regarding a potential significant pullback in the stock market before the upcoming presidential election. In an interview on Bloomberg Television, Stanley highlighted several factors contributing to the uncertainty, including the presidential campaign, corporate earnings, and Federal Reserve policy. He expressed his belief that a 10% correction is highly likely to occur sometime between now and the election, citing prevailing uncertainty as the primary reason.
Stanley’s bearish prediction comes amidst the ongoing record highs of the broad-based S&P 500 and the tech-heavy Nasdaq, driven by optimism surrounding Federal Reserve cuts and the flourishing artificial intelligence sector. On Monday, the S&P 500 closed at a record 5,572.85, while the Nasdaq reached an all-time high of 18,403.74. However, Stanley believes that the odds of stock prices closing the year higher than their current levels are only 20% to 25%.
Analysts from Goldman Sachs, JP Morgan Chase, and Citigroup have also forecasted a slowdown, citing weakening economic data. Stanley, who previously raised his target for the S&P 500 to 5,400 by mid-2025, now emphasizes the scarcity of new growth opportunities. Despite his warnings, Stanley advises investors not to be overly concerned, as a potential pullback could present buying opportunities. He suggests focusing on individual stocks rather than indexes.