Morgan Stanley’s Wilson Says Strong Dollar Threatens Stock Rally
(Bloomberg) -- A stronger dollar is one of the few obstacles threatening to hamper the stock market boom which has lifted US stocks to a series of records, according to Morgan Stanley’s Mike Wilson.
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The S&P 500 index recorded its 46th all-time closing high of 2024 on Monday as investors gear up for the latest round of corporate earnings. The benchmark ticked up again at the US market open.
“One of the things that could slow down the rally again would be a strengthening dollar,” the bank’s chief US equity strategist said Tuesday in an interview with Bloomberg Radio.
Bloomberg’s dollar index, a gauge of the currency’s relative strength versus its peers, has gained about 2% since the beginning of October as investors pare back bets on the pace at which the Federal Reserve will cut interest rates going forward.
“That is probably the one thing we are watching now that could kind of throw a wrench into these new records every day,” he added.
Wilson said the rally was robust, broadening through different sectors of the stock market and driven by central banks easing their monetary policy. “That will continue until we get a real shock in the economic front or you get a restriction on liquidity front,” he said.
Meanwhile, Bank of America Corp. strategists led by Michael Hartnett are seeing a “sell signal” for global equities from a survey conducted from Oct. 4 through Oct. 10. Fund manager allocations to stocks surged, while bond exposure sank and cash in global portfolios fell to 3.9% from 4.2%, the survey showed.
That’s “the biggest jump in investor optimism since June 2020 on Federal Reserve cuts, China stimulus, soft landing,” the strategists wrote in a note Tuesday.
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