Morgan Stanley has just come out with a big warning for investors. The bank says that the selloff over the last few weeks, which amounted to around 10% at its peak, was just a tiny start to what is to come. Describing the recent losses as the “Appetizer, not the main course”, Morgan Stanley says that big trouble will occur when growth weakens but inflation keeps moving ahead. “Strong global growth and a good first-quarter reporting season provided an important offset. We remain on watch for ‘tricky hand-off’ in the second quarter, as core inflation rises and activity indicators moderate”.
FINSUM: If growth starts to weaken, but inflation and rates are still rising, that is the catalyst for a big correction, or more likely, a prolonged bear market. But we are not there yet.