Re-opening US economy already priced in by Wall Street; Morgan Stanley downgrades small-caps

01/04/2022
By 夜上海论坛
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With the US economy now re-opening and getting back to the old normal, Morgan StanleyS. Equity Strategist, Mike Wilson says he is now concerned about the risks that come with the move. S. Equity Strategist for Morgan Stanley said in a podcast. Morgan Stanley has downgraded small-caps and consumer discretionary stocks while recommending a move up on the quality curve. Although the shortage in supply shortage is limited to certain materials, it could still damage the recovery. In fact, on a cumulative basis, retail sales are above where they would have been had we just stayed on the same uptrend pre-COVID, For firms that were purely beneficiaries of the work from trend, Morgan Stanley He adds that there are obvious candidates where a reduction in demand will be seen and expects more to be added to that list. But Mike Wilson has a contradictory view. Bottom line, we think this is another underappreciated risk we have not previously discussed, Wilson adds that travel and leisure activity are pockets where spending may increase after a year of curbs. Currently, markets are flooded with liquidity and benchmark indices are scaling fresh highs but valuations suggest the risk is elevated. Mike Wilson further added that the equity risk premium is very much underpricing risks such as peak rate of change in fundamentals as well as policy and liquidity, cost and margin pressures, equity supply, and extreme investor leverage. As a result, we think it