The current growth of S&P 500, which is a rally in the bear market, is a trap for the bulls, according to Morgan Stanley. In the first half of the year the index will fall by 24%, and the decline in the stock market will begin in the spring, warned its strategists led by Michael Wilson, which reports Bloomberg.
Nevertheless, this rally may continue for some time if interest rates and the dollar decline, Wilson believes. In his opinion, the S&P 500 reaching the 4,150-point resistance level could be a short-term reversal. However, he stressed that the level of risk now does not match the reward one can get from investing in stocks, adding that company earnings forecasts are inflated - the real numbers would diverge significantly from them, causing disappointment among investors.
The bank had previously warned that equity risk remained high in March as corporate earnings continued to decline.