Dow Futures on Edge as Morgan Stanley Predicts 10% Wipeout


  • Dow Jones Industrial Average (DJIA) futures looked nervous on Tuesday morning, trading flat.
  • Morgan Stanley’s chief equity strategist predicts a 10% correction before the recovery continues.
  • As nerves grow, analysts increase their gold targets above $2,000.

After a phenomenal rally yesterday, global stock markets are taking a breather. Dow Jones Industrial Average (DJIA) futures fell slightly lower on Tuesday, pointing to a nervous open.

But there could be a bigger correction to come. That’s according to Morgan Stanley’s chief U.S. equities strategist Mike Wilson. In his latest research note, he predicted a 10% correction in the near-term.

How To Get Free Crypto  

We think the most likely outcome remains a 10% correction in the broader index.

The red line marks a 10% drop in the Dow, if Morgan Stanley analysts are correct. Source: TradingView

Wilson and his team believe the selloff will be led by the very stocks that drove the rally: tech stocks.

The note comes on the same day the Nasdaq closed its 29th all-time high this year.

Dow futures struggle into Tuesday’s session

The wild optimism of Monday has worn off and U.S. indexes are treading water this morning. Dow futures slipped 43 points (0.16%) ahead of a key earnings report from Disney.

This Ad Keeps Us Going:

Dow Jones Industrial Average (DJIA) futures turned negative overnight. Source: Yahoo Finance

S&P 500 futures fared worse, down 0.28% while Nasdaq futures fell 0.33%.

Morgan Stanley still bullish despite 10% drop warning

Wilson has been eerily accurate throughout the last few months. His team called the bottom just a week before the Dow hit its lowest point in March. Wilson maintains we are in the first innings of a new bull run, but the market needs some time to cool off.

Once the correction is complete we expect the bull market to continue to broaden out.

So far, the recovery has been driven by ‘stay-at-home’ tech stocks. Wilson would like to see a larger rotation into banks, cyclicals, mid-cap and small-cap stocks before the real bull market begins.

Coinbase Banner  
Watch: Analysts remain cautious on stocks

Many other investors share Morgan Stanley’s caution. Ali Malik, investment advisor at Bank of Singapore, told Bloomberg this morning that his firm is cautious going into the rest of the year.

We are still invested in equities, but we are neutral. Having seen the market run up as much as it has from the March lows, we remain very cautious going into the second half of the year.

Like Wilson, Malik cited the upcoming U.S. election as a possible headwind for stocks.

Is gold sending the Dow a warning?

As investors grow cautious on stocks, they are ramping up their price targets on gold. The ‘safe haven’ hit another record high in yesterday’s session. Analysts see the metal pushing past $2,000 to as much as $2,200. Michael Hsueh from Deutsche Bank believes $2k is imminent for gold:

We had targeted $2000 in Q3 of next year, but now it looks quite certain we’ll be able to reach that level some time this year, if not next month.

Hsueh said the gradual slide in the dollar and declining real rates in the U.S. are strong catalysts for further growth in gold.

Maybank Group Wealth Management’s Eddy Loh said he wouldn’t be surprised to see some profit-taking in the near-term. But all the major drivers remain in place for the mid-term.

FreeBitcoin Banner  

In terms of gold being an effective hedge against market volatility and geopolitical tensions, I think that function still remains. So we won’t be surprised to see gold prices surpass the $2,000 mark or higher.

The demand for gold could be a warning sign for the equity markets. Some doomsday analysts still expect a final ‘melt-up’ in stocks before an 80% selloff.

This Ad Keeps Us Going:

Go to Source
Author: Ben Brown


Recommended Crypto Services, Products and Strategies:

The first thing any crypto investor needs is is a reliable and secure Crypto Wallet.  Whether you’re looking for an online wallet, hardware wallet, desktop or mobile wallet, Crypto Renegade provides you with all the Best Crypto Wallets in each category.

Best Crypto Wallets Banner

When you’re ready to buy more crypto, or exchange your coins for others, Crypto Renegade’s list of the Best Crypto Exchanges has you covered.  The Crypto Exchanges recommended here offer everything from simplicity and convenience to advanced trading platforms and profit sharing. 

Best Crypto Exchanges Banner

If you want to learn more about the methods and tools that can be used to find Great Crypto Projects, then be sure to check out Crypto Renegade’s strategy for How To Find The Best Cryptocurrency.

Crypto Strategy Banner

For those people that don’t have any money to invest right now, or just want to understand the technology a bit more, you’ll definitely want to check out Crypto Renegade’s Free Crypto Strategy and start collecting Free Coins today!

Free Crypto Banner

What do you think about cryptocurrency? Do you have any questions about it? Be sure to leave a comment below.

This site uses Akismet to reduce spam. Learn how your comment data is processed.