Morgan Stanley Sees the 'Sell Signal' for Wall Street, But Fundamentals Ignored
The negative appraisal of the mainstream financial market is growing. The top is close to being in, according to analysts at Morgan Stanley. For the fifth time in the past 30 years, there are market timing indicators which are giving a sell signal.
ZeroHedge summarized it:
According to Garman, the only time equities have risen after a "Full House" Sell Signal was in Feb 17, shortly after the Shanghai Accord kicked in to prevent a global recession. The other previous occasions where there was a "Full House" Sell Signal were Mar-90, May-92, Jun-07. According to MS, "in the 6M post the initial Full House Sell Signal, MSCI Europe has fallen on average 6%."
But this isn't going to result in a wide open call for the clients to start selling. People aren't responding in their predetermined ways to these signals. With Wall Street bats in their short squeeze pumping up AMC, Game Stop and others, the analysts and their predictions are not going according to plan.
As the current climate is proving, just because there is a sell signal doesn't mean selling will start. It's not the first time. In 2017 this also happened, where there was a massive sell signal that did not result in a market plunge.
Back in 2017, we remained constructive despite the signal given i) strong EPS growth, ii) an early cycle environment, iii) EU inflows, iv) low sentiment and v) a rise in M&A. Sentiment metrics may look more elevated than in 2017, but many of those factors remain in place today. While we see a trickier risk-reward for equities globally, we maintain our view that there is a compelling case for Europe to outperform global peers.
Fundamentals are out the window. Hype is driving everything.
As the current claimant is proving, just because there is a cell signal doesn't mean selling will start. It's not the first time. In 2017 this also happened, where there was a massive sell signal that did not result in a market plunge.
Back in 2017, we remained constructive despite the signal given i) strong EPS growth, ii) an early cycle environment, iii) EU inflows, iv) low sentiment and v) a rise in M&A. Sentiment metrics may look more elevated than in 2017, but many of those factors remain in place today. While we see a trickier risk-reward for equities globally, we maintain our view that there is a compelling case for Europe to outperform global peers.
Fundamentals are out the window. Hype is driving everything.
In Wall Street, everyone sees things going up and thinks things will keep going up. The recent past has demonstrated this. There are no large corrections that last. I remember in 2016 when the S&P 500 was supposed to make a big correction because things were overvalued, but there was only a minor correction and then everything Going and still is going into 2021.
It doesn't seem that the same pattern has occurred with crypto this year though. There has been a significant and sustained correction over the past month. The question remains unanswered as to whether it will remain this way for the rest of 2021, or if another bull run is on the horizon. Many people in crypto are expecting a greater Bull Run than we've already seen in February. Maybe they will be right.
Maybe were going to see crypto picked back up in the traditional market also keep moaning. But at some point things are going to crash back down somewhere closer to reality.
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