Tuesday saw all four major U.S. benchmark stock indexes fall after real estate data showed home sales fell 0.7% last month and Russian President Vladimir Putin suspended a nuclear arms control treaty with the United States. In addition, Morgan Stanley’s chief U.S. equity strategist said the stock market is in “death territory” and could fall another 26%.
U.S. tensions with Russia further rattled global markets as investors’ concerns about a prolonged recession swelled
Markets traded lower on Tuesday compared to the previous day as investors were shaken by the current macroeconomic backdrop. The National Association of Realtors (NAR) released areporton Tuesday showing that home sales fell 0.7% in January and that the U.S. real estate market is weakening.20} Gold and silverprices as well as thecrypto economyalso fell, the latter by 1.37% in the last 24 hours to $1.11 trillion in the last 24 hours. Equitiesfollowed the same patternwith the four major indices (DJI, GSPC, IXIC, RUT) down between 1.9% and 2.79%.
The NAR report, coupled with continued rising inflation, has investors concerned that the Federal Reserve will continue to raise interest rates, which some believe could crush the US economy. In addition, tensions between the U.S. and Russia rose significantly on Tuesday, with many believing that we are on the brink of World War III. Russian President Vladimir Putin suspended the New START nuclear treaty and put missiles into combat readiness.
Putin said the West was complicit in establishing “despicable methods of deception” when the United States and others were involved in Syria, Libya, and Iraq. Russia will stop participating in the New START Treaty,” Putin stressed at a national event.(38)(39) The nuclear treaty, signed by former presidents Dmitry Medvedev and Barack Obama in 2010, was intended to prevent nuclear testing and war. Putin’s speech does not bode well for global investors as the conflict between Ukraine and Russia continues to cripple the global economy.
A Morgan Stanley strategist warned of a “death zone” in the U.S. stock market
Moreover, Morgan Stanley strategists do not believe that the U.S. central bank and Chairman Jerome Powell will pivot this year. Michael Wilson, Morgan Stanley’s chief U.S. equity strategist,warns that the stock market is now in a “death zone”. Wilson elaborates that the name “death zone” is a term commonly used in mountaineering, where a person climbing to extreme heights loses oxygen. Wilson believes the stock market is in a similar death zone, predicting that the S&P 500 (GSP ) could fall as much as 3,000 points in a short period of time for the P 500 (GSPC).
“Many deaths in high altitude climbing are due to death zones leading to accidents, either directly due to loss of vital functions or indirectly due to poor judgment or physical weakness under stress,” Wilson explained in a note to investors.” This is a perfect description of the situation that equity investors are in today and, frankly, have been in many times over the past decade.”
The U.S. is facing a host of problems, including rising inflation in the economy, a slump in U.S. real estate, and rising tensions with other countries, which many suspect will slow the country’s growth and usher in a long recession as the Fed’s interest rates rise and the cost of living for the average American increases daily as a headwind. Moreover, according to a recent survey, 55% of Americans believe they will lose everything if a recession hits the United States. A majority of survey respondents (3 out of 4) suspect that the 2023 recession will materialize this year.
What are your thoughts on the current state of the stock market and growing concerns about the U.S. economy? Do you agree with the “death zone” warned by Morgan Stanley strategists? Or do you have a more optimistic outlook for the future of the U.S. economy? Share your thoughts in the comments section below.
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