The S&P 500 is about to drop sharply, Morgan Stanley's Michael J. Wilson warned, as investors struggle to find havens amid fears of a recession and aggressive tightening by the Federal Reserve.
"With defensive stocks now expensive and offering little absolute upside, the S&P 500 appears ready to join the ongoing bear market," said Morgan Stanley strategists in a note on Monday.
"The market has been so picked over at this point, it's not clear where the next rotation lies. In our experience, when that happens, it usually means the overall index is about to fall sharply with almost all stocks falling in unison," they explained.
The S&P 500 Index has slumped for three weeks in a row, sinking to the lowest level since mid-March on Friday as investors fled risk assets amid fears of rapid monetary tightening and its impact on economic growth.
[Editor's note: The S&P was down 1.20% Monday as of 11 a.m. ET and is down 11.45% year to date.]
