Sumary of “Weakest We’ve Ever Witnessed”: Morgan Stanley Warns Crashing Breadth Will Result In “Material Correction”:
- “Wilson points out that during the mid-cycle transition, forward P/Es typically fall by 20% while so far, P/Es have only fallen by 5% while forward earnings are up close to 20%,hence an S&P 500 that is currently up approximately 15%.
- As he warns, “if our narrative and framework are correct, P/Es should start to fall sharply over the next few months, bringing the index closer to our year-end target of 3900.”But what about market breadth?
- Well, as Wilson adds, in addition to all of the other market signals that support his midcycle transition narrative, “the overall market breadth has deteriorated significantly.
- ” He notes that this is also consistent with a mid-cycle transition “and usually precedes a material index level correction that marks the end of it.