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Morgan Stanley: U.S. Bull Market Coming to an End

January 9, 2018

The eight-plus-year equity bull market rally has reached its final leg, according to Morgan Stanley’s 2018 equity outlook cited by Business Insider.

The market has reached the “euphoria” stage, during which investors are overly confident and increasingly disregard risk, Morgan Stanley says, according to the web publication. This stage typically coincides with the end of a bull rally — or, as Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, puts it, “no cyclical bull market has ever ended without some excitement from investors,” according to comments he made last month cited by Business Insider.

Morgan Stanley also forecasts a slowdown in earnings growth in the first half of the year, which, combined with current investor sentiment, makes the firm cautious in its outlook, according to the web publication.

Wilson also says any positive effect from the GOP’s tax overhaul has already been priced into the market, although his stance isn’t shared by analysts at other firms, Business Insider observes.

Yet the “euphoria” stage can last for a long time, so the end is not imminent, according to Wilson. But upside potential could now be limited, and gains are likely to become more speculative, Wilson says, according to Business Insider.

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He suggests investors stop chasing equity returns in the U.S. and instead look to Europe and Japan in 2018 and beyond, where valuations are lower and earnings could grow faster, as the regions’ recoveries from the financial crisis are still in their early stages, according to the publication.

By Alex Padalka
  • To read the Business Insider article cited in this story, click here.