TechFlow News, June 23: Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist at Morgan Stanley, stated that although equity markets have weakened and the yield curve has flattened, last week’s FOMC meeting—led by Federal Reserve Chair Jerome Powell—was a good and necessary first step toward restoring the Fed’s credibility. Wilson noted that since Powell’s nomination in February, the S&P 500-to-gold ratio has risen nearly 40%, which he views as a strong vote of confidence from markets in the new chair’s ability to restore policy discipline. Morgan Stanley strategists pointed out that liquidity—not interest rate hikes—is the primary near-term risk facing equity markets. He noted that the size of the Reserve Management Program has declined approximately 75% from its peak, and Treasury repo operations have been scaled back by 50%.
Wilson warned that accelerating loan growth is exacerbating liquidity tightening, as the real economy absorbs more capital amid shrinking balance-sheet support. He expects U.S. equity markets to be volatile in July, with potential pullbacks; the next leg up in the earnings-driven bull market will likely be delayed until liquidity headwinds dissipate. Wilson also expressed support for Powell’s move to reduce excessive forward guidance, arguing that markets should react to newly released data rather than attempt to anticipate Fed statements. (Jinshi)
