English
The stock market may witness a selling wave due to the Fed's statements this week
Morgan Stanley warned that investors are pinning too much on the idea that the Federal Reserve will start cutting interest rates later this year, and that this belief could sell off the market.
Mike Wilson, an equity strategist at the US bank, said that the Fed will raise interest rates by about 25 basis points this week, as markets expect.
But he made it clear that the Fed's hawkish comments may re-pricing the current interest rate expectations from a cut by the end of this year to a long-term fixation.
Wilson said in a note issued on May 1 that investors are less focused on the upcoming Fed meeting as a potential risk to stocks.
He added: The meeting on Tuesday and Wednesday from the Fed's side may become a catalyst for lower stock prices in the event that Jerome Powell changes the market's view on the future direction of interest rates.
Wilson continued: In the event that the message emanating from the next meeting of the Federal Reserve is more hawkish, it may constitute a negative surprise in the near term for stocks.
The markets are currently expecting the Federal Reserve to raise the interest rate by about 25 basis points at this week’s meeting, and then fix interest until the last two meetings of the current year, to start cutting interest rates by about 25 basis points for each of the November and December meetings.
