Morgan Stanley Sees Near-Term Stock Rally

Wilson noted the gap between reported earnings and cash flow is the widest in 25 years, driven by excess inventory and capitalized costs that have yet to be reflected.

Despite hawkish comments from Federal Reserve officials and continued hot inflation and jobs data, the S&P 500 has risen 5.4% this year, while the technology benchmark Nasdaq 100 surged over 12%. Wilson has recently warned that he expects deteriorating fundamentals.

Such caution is echoed at JPMorgan Chase & Co., where strategists led by Mislav Matejka recommend investors use recent gains as an opportunity to trim exposure.

Matejka is also particularly negative on US equities, pointing out that relative valuations and earnings are near historic highs, while they could “keep unwinding some of the strong run that it delivered over the past 10 years,” according to a note on Monday.

To be sure, others take an opposing view. At Wells Fargo, strategist Christopher Harvey is convinced that the equity market bounce has further room. “Do not trade as if we’re in a bear market, because we are not,” he wrote in a note on Monday.

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