(New York)

Is there gain ahead or pain ahead? That is the question on every investors’ mind. Well, Morgan Stanley has an answer. The bank’s chief US equity strategist, Michael Wilson, says that the answer is more pain. The bank thinks we are in a “rolling bear market” and that stocks will reach bear status soon. “We think we get there in four to eight weeks”, says Wilson. The bank defines a bear market as a drop of 20% or more with no recovery for 12 months. “Risk-reward remains unattractive for us”, he added.

FINSUM: Morgan Stanley thinks a lot of these losses come down to the change in central bank policy. We agree with that but we also think investors are just anxious about what lays ahead in terms of a possible recession, trade war, and beyond.

(New York)

Goldman Sachs thinks this selloff is “overdone” and that a rally is coming. The bank thinks the current market presents a good buying opportunity and forecasts the market to rise 7% before the end of the year. According to the bank “The recent sell-off has priced too sharp of a near-term growth slowdown. We expect continued economic and earnings growth will support a rebound in the S&P 500”. To play the rebound, the bank says to look at stocks in its “high quality” basket. These include: Mastercard, Cognizant Technology Solutions, Alphabet, Accenture, Ansys, C.H. Robinson Worldwide, Edwards Lifesciences, International Flavors & Fragrances, and Ross Stores.

FINSUM: That is a very wide selection of choices, but more interesting to us is Goldman’s view on a recovery. We agree that this selloff seems to be an overreaction relative to the fundamentals.

(Washington)

The GOP seems to be on its back foot heading into the midterm elections and that has the party nervous. The political bombing attempts and the synagogue horror have both sent Trump’s approval rating sharply lower. Now the party is worried that pre-Trump Republicans in affluent suburbs may not show up to vote, which is making them worry they may lose more ground than forecast. According to polls, this group of affluent long-term Republicans has a lower overall interest in the midterms, which may sap much needed votes against the more motivated Democrats.

FINSUM: This is a problem in itself, but the fact that the midterms have become so much of a referendum on Trump at the same time as his approval rating is falling is not a good sign for the party.

(Chicago)

In 2010, Meredith Whitney, famed market analyst, made a bold call that still haunts her and the muni market to this day—that there would 50 to 100 sizable defaults in the next year. The call, which came on 60 Minutes in 2010, led to a major backlash by the muni market. Besides Detroit and Puerto Rico, which were widely forecasted, her predictions never came true, or at least were certainly far too early. To this day, many of the problems that haunt the muni market, like shrinking populations in indebted areas, are still definitively long-term issues that are not going to immediately take down the market. Even the pension deficit is not as bad as many perceive, with a 71% funded ratio on average (economists say the optimal number is 80%).

FINSUM: The muni market gets a lot of bad press, mostly because of the handful of dire situations, but on the whole it has been quite steady.

(New York)

If you think the market has been bad overall, take a look at the asset management sector, which has been brutalized in the last few weeks. The S&P index of asset managers has fallen 14% this month, compared with a 9.3% drop for the market overall. That adds to a lot of pain already this year—the index has lost almost 25% of its value in 2018 and is headed for the biggest loss since 2008. Some, like leader BlackRock, have been hit very hard just this month with shares down 17%.

FINSUM: Weak fees and poor fund flows are the immediate problem, but they are a major issue because they support investors’ fears of disruption in the industry.