S&P 500: Don't chase the bear market rally – Morgan Stanley

Stocks have staged a major rebound, but investors shouldn’t rush to buy the S&P 500 now. The market may have already come back too far, too fast, according to Lisa Shalett from Morgan Stanley.

Key quotes

“Rallies in the middle of bear markets are to be expected. While we still see areas of opportunity (in areas like financials, small caps, cyclicals and health care), a great deal of uncertainty remains.”

“Even with stimulus checks, extended unemployment benefits and low-interest rate loans, it’s unclear whether the majority of consumers will remain cautious about their spending and behavior long after social distancing requirements have been lifted.”

“There will be a 20% earnings decline and has a year-end price target of 3000 for the S&P 500. That’s only 125 points above where we are now. If the recovery is delayed or reported profits are worse than currently modeled, that price target may not hold.”