Morgan Stanley thinks it knows when the bull market will end

(FinancialPress) — The stock market party will carry on for a little longer. However, we may be approaching last call. Morgan Stanley states that the market “can mount one last rally“ over the summer before peaking in the second semester in 2018. The prediction was part of a report released by the bank this week.

Andrew Sheets, who leads the cross asset strategy division at the institution, wrote: “We think that this bull market has limited runway.“

The note cited a slew of positive variables that are beginning to turn into the opposite direction. Inflation is rising. World economic growth is expected to begin lagging. The White House shifted away from a tax cut angle towards a tariff imposition one. And the Fed aims to accelerate interest rate hikes.
Sheets added that “all this now appears to be changing, and all at once,” and it‘s “not just a harder environment, but a fundamental shift.”

The current bull market began its run in March 2009. It currently holds the record for second-longest in history.

Between 2016 and the beginning of 2018, the market has seemingly only moved upward. The Dow rose from 18,333 at the time of President Trump‘s election all the way to the all-time high of 26,616 by the end of January.

Not all was fine and dandy over this time, though. Growing fears of a possible trade wars and a spike in inflation leveraged a decrease in stocks in the winter. The Dow now sits about 2,000 points below that historical threshold.

The billion-dollar burning question in Wall Street remains: is the bull market running out of steam?

“2018 will see a series of rolling tops,” Sheets wrote, highlighting that the extreme turbulence at the beginning of 2018 was “not an aberration.”

“Some time in the next year and a half, the economy will probably fade” into a recession, said Guy LeBas, Janney Capital‘s chief fixed income strategist. “It’s part of the natural ebb and flow of the US economy.”

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