Morgan Stanley's Stock Market Forecast for December 2023: A Crypto Perspective

• Morgan Stanley's CIO Anticipates Increased Market Volatility in December
• Near-term Volatility Expected
• The S&P 500's Current Challenge
• The January Effect
• Strategist's Outlook for 2023
• Final Thoughts

Morgan Stanley's CIO Anticipates Increased Market Volatility in December

Near-term Volatility Expected

According to Wilson's client note, both bond yields and equities may experience "near-term volatility" as we move into the new month, leading to a potential reversal of the recent risk-on trend. He attributes this to the excessive stretch of market following November's rally - one of the best for that month - resulting in it being ripe for a possible setback.

The S&P 500's Current Challenge

The January Effect

Michael Wilson also speaks of the potential for a further market revival in early 2023, owing to a combination of favorable seasonal trends and the well-known January Effect. He adds that investor confidence this time might also be strengthened by a possible shift in the Federal Reserve's stance in 2023. Wilson stated, Bulls have shown the most support this time based on a healthy macro backdrop. If this were to unfold, it would be the most bullish outcome for equities.

Strategist's Outlook for 2023

As we move into the next year, Wilson seems to be juggling between a reluctant acceptance of waning recessionary fears and a contrarian pessimism. He suggests that peak inflation leading to falling interest rates could create the perfect conditions for risk-asset outperformance. However, he warns that the Federal Reserve's pivot narrative has often missed its mark in the battle against inflation.

Final Thoughts

Morgan Stanley advises investors to prepare for a possible Federal Reserve-induced volatility that could shock both equities and bonds this December. The firm suggests that investors be wary of overly optimistic growth prospects.

Edited by Jonathan Stoker