Morgan Stanley’s CIO cautioned investors regarding the risks of President, Donald Trump‘s growth-negative policies such as tariffs and immigration enforcement.
What Happened: The Chief U.S. Equity Strategist and CIO of Morgan Stanley, Mike Wilson, predicted weak stock returns for the S&P 500 in the next 3 to 6 months.
He pointed out that the “equity negative” policies were introduced before the “equity positive” measures had sufficient time to take effect in the form of less crowding out and lower interest rates. He mentioned deregulation, tax extensions, and reduced government spending as some of these ‘equity-positive’ measures.
He cautioned about tough times ahead and predicted the S&P 500 to trade between $5,500-$6,100 in the next 3 to 6 months, with a fourth-quarter price target of $6,500. “Since we have been expecting tariffs to be implemented, this realization only furthers our preference for consumer services over goods. It also supports our preference for financials and other domestically geared businesses that have limited currency or trade exposures,” added the Morgan Stanley CIO.
The Morgan Stanley top strategist believes that DeepSeek’s latest AI model has added another level of uncertainty for investors and reiterated his preference for software and media over semiconductors. However, BofA’s Vivek Arya stated yesterday “Despite DeepSeek’s supposed ‘revolutionary' optimizations, there is no change thus far to spending intentions at Nvidia NVDA large customers including Microsoft MSFT and Meta Platforms Inc. META.”
Why It Matters: In the last two weeks since President Trump’s inauguration, the market has been nearly flat, with the S&P 500 slipping 0.18% since Jan. 20. Trump’s announcement of a 25% tariff on imports from Canada and Mexico, which has been postponed by a month.
Prior to that, the announcement of DeepSeek unsettled the technology sector, triggering a brief market selloff.
In addition to Morgan Stanley, economists at Goldman Sachs have raised concerns about the imposition of tariffs. They estimate that for every 5-percentage-point increase in the tariff rate, the S&P 500’s earnings per share could decline by approximately 1% to 2%.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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