Morgan Stanley: US stocks run the risk of falling 11% as a result of the trade war

Michael Wilson of Morgan Stanley said US stocks are at risk of falling by 11% if trading tensions between the United States and China are not resolved before the deadline in November. The most important US equity strategist at Morgan Stanley explained that the market has become prepared for a downward correction in light of the increase in exposure to investors and equity values ​​compared to corporate profits or expected growth, adding that the escalation of the trade war on Friday was a surprise for most analysts and also for us. ” Wilson maintained his positive prospects on US shares this year and was one of the few analysts who accurately predicted a strong recovery after the sharp sale elicited by rates in April. The expected decline in US stocks: “If trade -related uncertainty and volatility continues in early November, we can see a greater correction than most investors expect,” Wilson wrote in a research note. He expected the Standard & Poor’s 500 index to drop to between 6.027 and 5.800 points according to the pessimistic scenario. This means a drop of between 8% and 11% compared to last Friday closure. US stocks saw sharp fluctuations on Friday after President Donald Trump threatened to draw up additional 100% tariffs on China, in addition to imposing restrictions on the export of basic software from November 1. The Standard & Poor’s 500 index fell 2.7%, while the Nasdaq fell 100 by 3.5%, ending the record increase, fueled by investors’ artificial intelligence betting. The achievement of an agreement with China Stock Index futures rose on Monday after the White House expressed its openness to reach an agreement with Beijing. Also read: The Trump administration opens the door for an agreement with China to contain emerging tension. The Trump administration opens the door for a deal with China to contain emerging tension. In his memorandum, Wilson reiterated that his basic scenario is based on the continuation of gradual economic recovery until 2026, as soon as the tensions of the trade subside. He said that this hypothesis is “strong enough to withstand such tactical trading in the short term, as it will probably end up with scams.”