Since the sharp decline in August, strong data has helped the market recover, and Wilson expects the non-farm payrolls report to drive this trend. However, if the data is weaker than expected and the unemployment rate rises, the stock market will be under pressure, as it was last month.
Financial Association News, September 3rd (Editor: Niu Zhanlin) Morgan Stanley strategist, who accurately predicted the pullback in the US stock market last month, said that if the non-farm payroll data released this Friday further proves the resilience of the economy, stocks that have lagged behind in the US stock market rebound may be boosted.
The latest report from Morgan Stanley's chief US stock strategist, Mike Wilson, stated that better-than-expected non-farm employment data may give investors "greater confidence that the risks of economic growth have faded." Currently, the market expects a seasonally adjusted increase of 0.165 million in non-farm employment in August, compared to a previous value of 0.114 million.
Technology stocks have largely driven the surge of the S&P 500 index this year, but in recent weeks, investors have turned to other sectors due to concerns about the high valuation of technology stocks.
After experiencing a historic battle against inflation, traders are also waiting to see how aggressively the Federal Reserve will cut interest rates later this month.
According to the data, approximately 16% of the constituents of the S&P 500 index are at their 52-week highs, compared to 4% at the beginning of the year. Since the sharp decline in August, strong data has helped the market recover, and Wilson expects the non-farm payrolls report this week to drive this trend. However, if the data is weaker than expected and the unemployment rate rises, the stock market will be under pressure, as it was last month.
Wilson reiterated his preference for defensive stocks while warning investors to stay away from small-cap stocks or "other cheap cyclical stocks that have performed poorly in recent years, primarily because economic growth is slowing down."
In early July, he warned that traders should be prepared for a significant pullback in US stocks due to the uncertainty surrounding the US election, corporate earnings, and Federal Reserve policies. Less than a month later, the S&P 500 index fell 8.5% from its high point.
But this may not prove Wilson's strength. As one of the most pessimistic strategists on Wall Street, Wilson has been bearish all last year, but the S&P 500 index rose by 24% last year.
Wilson pointed out that for the US stock market, the 'ideal state or condition' would be a series of 25 basis point rate cuts by the Fed, accompanied by stable economic growth. 'But if the rate cut is greater and accompanied by a weak labor market, then the stock market may not react positively to this.'
Wilson warned that one challenge facing investors is that the US stock market has already absorbed expectations of a soft landing, which limits the overall upside potential of the index. He added that if the data once again triggers concerns about a hard landing, it may lead to a 'significant' downturn.
The strategist's overall target is for the S&P 500 index to reach 5400 points by mid-2025, which means the index will fall by about 4% from the current level.
September is typically one of the most unstable months in the market, and with the controversies surrounding the presidential election, the turmoil may intensify, and this election is already full of surprises. Others are still concerned about the huge market share held by technology giants and are worried that the speculation around artificial intelligence (AI) has been excessive.