US market correction nearing end, Morgan Stanley strategists say
Morgan Stanley strategists are signaling that the US market correction, which has persisted since June, is approaching its conclusion. They highlight that the expected impact of the midterm elections on November 3 could alleviate some market uncertainty. This perspective aligns with a growing sentiment that a stabilization may lead to changes in risk appetite, potentially favoring a bullish tilt across markets next month. A market rebound could pressure USD crosses as investor sentiment shifts.
Where it sits in our coverage
Our consensus EUR/USD target is currently at 1.075 (median across 8 firms), with Goldman positioned at the upper boundary (1.12) and BofA at the lower limit (1.04). Morgan Stanley’s view aligns with the broader consensus that markets may stabilize post-election, which is reflected in our numbers.
How firms align
Morgan Stanley's assertion that the market correction is winding down suggests a possible upward trajectory for risk assets. Firms like JPMorgan maintain a bullish stance, with a target of 1.10, supporting the idea that a recovery is plausible post-midterms. Conversely, BofA's more cautious outlook at 1.04 indicates some skepticism about the upcoming recovery.
What the data shows
Recent revisions across our forecasts suggest that traders are increasingly factoring in a potential recovery, emphasizing a shift towards risk assets. Analysis from prior insights (/research/electionimpact) amplifies expectations that market dynamics will shift as uncertainties from the elections dissipate.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Morgan Stanley sees the US market correction nearing its end.
- 02A post-election recovery could strengthen risk sentiment.
- 03Traders should monitor USD crosses for potential upward shifts.
- 04BofA's cautious position suggests caution in adopting a fully bullish stance.
Market implications
Investors should keep an eye on the upcoming midterm elections on November 3, as results may catalyze shifts in market sentiment. A consensus target of 1.075 for EUR/USD could see adjustments if sentiment swings favor a recovery.
Risks to this view
If the election results lead to unexpected volatility or if economic data post-election disappoints, this could invalidate the optimism around a market recovery and potentially underpin support for the USD.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
Firms mentioned
Sources & References
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