Morgan Stanley Analyst Reverses 'Tactical Recovery' Call And Turns Seller Of Stocks: Here's Why

Even as the market showed some signs of resurgence as it entered one of its seasonally strong periods, one analyst is not that optimistic about a reversal in sentiment.

What Happened: Morgan Stanley is a seller again, analysts led by strategists Michael Wilson wrote in a note to clients, reported Bloomberg. The analysts have called for a resumption of the downtrend close on the heels of the S&P 500 Index breaking above its 200-day moving after a seven-month hiatus.

The downtrend that began at the start of the year is still intact, the analysts said. “This makes the risk-reward of playing for more upside quite poor at this point,” they added.

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This is a reversal in stance by Wilson, who said last week the “tactical recovery” could continue into December. He had then said, renewed selling would emerge in the new year, dragged by weak corporate earnings.

He sees the S&P 500 Index climbing just about 2% from current levels to 4,150 over the next week or so.

Stay Invested In Defensives: Against this backdrop, the strategist recommended sticking to a defensive posture and preferring healthcare, utility and consumer staple stocks.

Growth stocks, which typically benefit from lower rates, could be held down in 2023 due to the risk to corporate profit growth.

Tech stocks have underperformed this year, as is evident from the 26% plunge year-to-date compared to the more modest 14% drop by the S&P 500 Index.

Big techs such as Meta Platforms Inc. (NASDAQ: AMZN), Amazon Inc. (NASDAQ: AMZN) and Alphabet Inc. (NASDAQ: GOOGL) (NASDAQ: GOOG) are down 63%, 44% and 31%, respectively, this year. Even the fairly resilient Apple Inc. (NASDAQ: AAPL) has lost 16% year-to-date.

The Invesco QQQ Trust (NASDAQ: QQQ), which tracks the performance of the Nasdaq 100 Index, fell 0.21% to $291.93 in premarket trading, according to Benzinga Pro data.

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