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Interesting read that counsels lightening up on equities before a predicted earnings recession sets in. Is this in contrast to Black Rock Chief Executive Larry Fink's pondering about a possible coming stock market melt up (see short article linked below)? Or, perhaps this is just the sequence of events that gets to unfold over the next few months as animal spirits shine for a while longer before being crushed.
From this Morgan Stanley GIC Weekly:
It is appropriate that risk premiums have readjusted for the change in Fed policy, but valuation multiples are now at the high end of their range....We believe the headwinds from a weakening Europe, a strong US dollar, rising labor costs, higher oil and industrial metals prices, increased capital costs and above-average inventories will cause an earnings recession and further disappointment....Consider taking profits in the tech sector, where valuations are rich and negative operating leverage on profits may be most severe
From the short article linked below:
“Despite where the markets are in equities, we have not seen money being put to work,” Fink said. “We have record amounts of money in cash.”...Fink said the dovishness of central bankers creates a shortage of “good assets,” which could serve as a trigger for a global melt-up in equity prices.
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From this Morgan Stanley GIC Weekly: From the short article linked below: https://www.marketwatch.com/story/blackrocks-fink-says-stock-market-at-risk-of-a-melt-up-not-a-meltdown-2019-04-16