Morgan Stanley recommends caution in investing in US stocks – Grain to grain

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Last month, I wrote that Brazilians could be rushing to migrate their investments to invest in the American stock market. This Monday, Bloomberg and MarketWatch websites alerted their readers to Morgan Stanley’s new recommendation.

Morgan Stanley released a note advising investors to be cautious when investing in the US stock index, S&P500, for 2022. According to Bloomberg, Morgan Stanley’s projection for the US index in 2022 is 4,400 points. This represents a 6% devaluation from the current price level.

Morgan Stanley wasn’t the only major financial institution to take a more cautious view of the stock market. Goldman Sachs also suggested caution.

The reason for this change in recommendation is no different from what I warned about last month: frustration in previous growth expectations, higher-than-expected inflation and the possibility of higher-than-expected interest rate hikes.

Despite this new, more cautious perspective from some American institutions, this view is not unanimous.

According to a Bloomberg survey, Wells Fargo, for example, suggests that the S&P 500 could reach 4,850 points this year 2021. Therefore, an appreciation of another 3% in less than two months.

Other big banks maintain an optimistic view on corporate earnings growth, which supports stock valuations. In addition to Wells Fargo, UBS and JP Morgan are betting on strong earnings growth for next year.

According to a survey among strategists carried out by Bloomberg, there is an average expectation of earnings growth of 7.7% for 2022.

Despite favorable expectations, with expected earnings growth of less than 8%, the US index is not expected to appreciate more than the expected earnings growth itself.

Comparatively, Brazil currently has fixed-income securities that present a return higher than this, without the risk of the stock market. The Selic rate itself should exceed 10% next year. Therefore, think carefully before increasing investments in the American stock exchange.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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