Economic News

Morgan Stanley Analyst Declares the Bear Market Has Begun

Anyone keeping an eye on the stock market over the past week or two is surely seeing red — literally. Following a series of selloffs, the markets have given back all of their 2018 gains so far. Additionally the Nasdaq has been struggling as big tech stocks like Apple, Amazon, and Facebook continue to slide (although they’ve seen a small bounce so far today). So has the controversially-crowned longest bull market in history come to an end? As CNN Business reports, one Morgan Stanley analyst has declared it so.

In a report to clients sent earlier this week, Morgan Stanley equity strategist Michael Wilson asserted that “We are in a bear market.” Pointing to the economy’s strong by decelerating growth, Wilson concluded, “While 2018 is clearly not a year of recession, the market is speaking loudly that bad news is coming.” Interestingly it’s not even necessarily bad news that’s sending individual stocks south as some slumping companies have even exceeded earnings expectations. This phenomenon led Wilson to write, “In our view, when stocks sell off on good news, that’s a bear market.”

Despite Wilson’s strong warning — timed to a turbulent week for the market — the declaration may still be premature. CNN Business notes that, as rocky as the past week or so has been, the S&P 500 is only down 9% from highs recorded in September. That’s significantly shy of the 20% it would have to dip before it officially reached bear status. At the same time, Morgan Stanley rebuts that 40% of S&P 500 stocks have fallen below that 20% threshold, potentially indicating a larger change in course.

Of course not all analysts are on board with Wilson’s conclusion. In fact Goldman Sachs chief U.S. equity strategist David Kostin predicted last week that the S&P 500 would close out the year at 2850, which would mark a 6% improvement over its current level. Meanwhile Neuberger Berman’s multi-asset chief investment officer Erik Knutzen wrote this week that, “Volatility is not the same as a sustained bear market,” also noting that market corrections “rarely” become bear markets outside of a recession.

Given the volatility that’s hit the market in recent days, it’s easy to think that things may be taking a turn. However analysts can argue their side until their blue in the face — at the end of the day, it’s the numbers that matter. To that point, despite the occasional bucking throwing some investors off, the bull market rides on for now.

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