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Despite this week's rise in the overall stock market largely based on the U.S. government stimulus package, Morgan Stanley's team looked at recession factors and how and the economy may bounce back. The bottom line is they believe investors might be wise to buy some stock.
Looking beyond the coronavirus, Mike Wilson, Morgan Stanley's chief equity strategist and chief investment officer, wrote Wednesday, "Price action and our conversations with investors suggest that the market is clearly moving toward a base case of a U.S. recession. However, a flight to liquidity combined with institutional positioning dynamics played a major role in accelerating the move lower."
He notes that both legislation and Fed action will take time to "ripple through the system." But "markets are now trading slightly below our downside case on the S&P 500; given the accelerated move lower, we believe that longer-term investors might start to consider adding to equity risk."
