A note from Morgan Stanley on Monday says to expect a US equity market pullback in Q3 of up to 10%:
- “Over the last couple of weeks, we have noted that investors should expect a modest pullback in the third quarter,”
Morgan Stanley cite tariffs to take a toll on both consumers and corporate balance sheets.
Bloomberg conveyed the information on the note. Bloomberg is gated.
The piece notes further that data last week showed:
- an uptick in inflation
- weakening job growth
- weakening consumer spending
And also notes:
- seasonal weakness in August and September - "Over the past three decades, the S&P 500 has performed the worst in August and September, losing 0.7% on average in each month, compared with a 1.1% gain on average across other months"
- stocks have gotten expensive. The S&P 500’s 14-day relative strength index topped 76 last week — its highest point since July 2024 before US stock briefly peaked last summer and above the 70 level that market technicians view as a sign of overheating.
I feel like a bit of a curmudgeon posting this. All around me I see bulls high fiving after Monday's performance. Thankfully I wasn't around much over the weekend to see them crying over Friday ;-)
