The S&P 500 (SPX) has lost 7.3% since the beginning of March, putting the index on track for its worst month of performance since 2022. However, the selloff could soon see a bottom, according to Morgan Stanley’s Mike Wilson.
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New trading tool for QQQ bullsWilson noted that the downturn “is getting closer to its ending stages” and that investors have already priced risks to growth, as seen by the forward price-to-earnings (P/E) ratio of the benchmark index falling by 15%.
Market Bets on Strait Recovery Over Recession, Says Morgan Stanley
Brent crude oil prices (BZ) have surged 51% since the start of the U.S.-Iran war, although higher energy costs have already been priced into the market, according to Morgan Stanley. “The market is saying the cumulative probability of the paths to resuming tanker flow in the Strait are much higher than the recession probability, and we agree,” wrote strategists at the firm.
Still, higher interest rates present a risk to stocks in the near-term. Rising oil prices have depressed the odds of rate cuts, with the CME FedWatch tool indicating an 81% chance that rates will stay unchanged by year-end, up from 3.9% a month ago.