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Mike Wilson Sticks With It
Morgan Stanley's Mike Wilson isn't giving up on it, where "it" is a less-than-rosy take on the prospects for US equities, which came into the second half riding a bull.
Although Wilson readily concedes he's been wrong this year, he's reluctant to accept the notion that stocks have the all-clear. One persistent concern for Morgan Stanley's US equities team is the "earnings impact of falling inflation." This is a familiar narrative for regular readers and Wilson reiterated the main points on Mond
just watching headlines float across my screens the last few days one could observe exuberance entering the building … recession packing up and leaving on vacation. as soon as everybody says the same thing, i start listening to those lone voices in the woods ….
I’ve been busy remodeling since the pandemic started. Up until recently it was all about finding available product and paying more to get it. In the last couple of months ‘sales’ are now common with markdowns 20 to 40 percent.
Whatever “falling inflation” occurs, this will be offset by Congress continuing to spend in excess of collected taxes. Prior to covid, that amount was about $1T annually- but going forward, that gap will be larger, especially as the social security/ medicare funds are emptied.
The second shift in consumer habits that will offset the drag on earnings is that covid “ turned on” the Boomers’ “switch” for spending. They are running out of time to spend their life savings. Once you get “too old”, health concerns will outweigh the desire to spend.
+1 on your comment about COVID turning on Boomers’ switch for spending. I am hearing anecdotal stories from the 45-yr old crowd about their parents spending “too much” money.