Once offering the worst return on Wall Street, money now seems like the best asset to own, says Morgan Stanley

Once offering the worst return on Wall Street, money now seems like the best asset to own, says Morgan Stanley

Stock sellers are ready to pick up where they left off on Friday as the market appears to be waking up from its August slumber with a vengeance.

As Goldman Sach US Chief Equity Strategist David Kostin told clients after the S&P 500 SPX,
-1.29%
it took just 17 weeks to hit its year-end target of 4,300, “the rally looks limited as downside risks loom”. His concern is that we may be entering a 2000 trap where the market declines even after the hike stops if the US slips into recession.

This brings us to our call of the day from Morgan Stanley strategist Andrew Sheets, who says investors should consider cash as a viable investment strategy, even if it hasn’t seemed such a winning proposition in the past.

“Withholding money… has been an explicitly defensive decision for much of the last 12 years. Of course, it offered a worse return than anything else on the market,” Sheets told clients in the bank’s Sunday note. This strategy also proved expensive, with the dollar underperforming the S&P 500 SPX,
-1.29%
and the 10-year US Treasury bill TMBMUSD10Y,
2.984%
between 2010 and 2020 (except 2013 and 2018), he added.

Bloomberg, Morgan Stanley Research

“But the idea that saving money means paying for insurance is no longer correct,” said Sheets, who notes that 6-month U.S. Treasuries TMUBMUSD06M,
3.144%
yields (3.1%) are the highest since late 2007, offering 157 basis points more than S&P 500 dividends, 21 basis points more than TMUBMUSD10Y 10-year Treasuries,
2.984%,
and just 60 basis points on the US AGG aggregate bond index,
-0.70%.

“For dollar investors, money is no longer a material obstacle to a portfolio’s current yield,” he said. Even saving money in Europe, which used to be extremely expensive, is no longer, like the 6 month German account TMBMBDE-06M,
0.339%
yields are positive for the first time since 2014.

Streets said that, on a cross-asset basis, US dollar money offers a high current yield, liquidity and a 12-month total return better than Morgan Stanley’s own implied predictions for US equities, US Treasuries and US, investment grade and high-yield credit – “with considerably lower volatility.”

That’s why Morgan Stanley’s top-optimized fixed-income portfolios are overweight in short-term fixed-income, he said. Against other currencies, the dollar also holds up, and the bank’s currency experts see more of this strength ahead, especially against the euro EURUSD,
-0.41%,
which once again hit par on Monday as concerns about winter fuel shortages in Europe mount.

The market

ES00 stock futures,
-1.12%

YM00,
-0.90%

NQ00,
-1.50%
are sliding south, with TMUBMUSD10Y bond yields,
2.984%

TMUBMUSD02Y,
3.276%
reflecting a cautious climate and CL.1 oil prices,
-0.21%

BRN00,
-0.17%
under pressure. Investors continue to push the dollar DXY,
+0.24%
higher. Elsewhere, it was a busy day at the Asian and European SXXP stocks,
-0.91%
are under pressure.

the hum

Among this week’s data and events will be the PMI numbers, second quarter GDP, the Fed’s favorite inflation indicator and the central bank meeting in Jackson Hole with President Jerome Powell speaking on Friday morning.

On the beat of the meme stock, AMC Entertainment AMC,
-6.58%
is falling ahead of the start of trading for preferred stock units, or ApesL, and London-based Cineworld CINE,
-23.81%
confirmed that it was considering filing for bankruptcy in the US. Stock in the companion meme, Bed Bath & Beyond BBBY,
-40.54%,
is also falling.

CEO Elon Musk said the Tesla TSLA,
-2.05%
will raise the price of its ‘Full Self-Driving’ feature to $15,000.

Joining CVS CVS,
+0.40%,
Amazon AMZN,
-2.86%
is among the bidders of the health company Signify Health SGFY,
-2.44%.

China’s central bank cut its benchmark lending rate, a move aimed at boosting its shaky housing market. Meanwhile, power rationing in the drought-stricken southwest affecting industrial companies and Tesla in Shanghai has been extended.

Retail and tech names will be reported this week, with Zoom Video ZM,
-3.57%
and Palo Alto Networks PANW,
-0.84%
due after Monday closing. Macy’s M,
-4.53%,
Dick’s Sporting Goods DKS,
-1.26%,
DLTR Dollar Tree,
-0.22%
and General Dollar DG,
-1.47%,
Peloton PTON,
-7.50%,
Nvidia NVDA,
-4.92%,
CRM Salesforce,
-2.21%
and Marvell MRVL,
-2.58%
among other highlights.

A group of Apple AAPL,
-1.51%
workers are reportedly thwarting a request to return to the office for next month.

Fans rushing to watch HBO’s “Game of Thrones” prequel “House of the Dragon,” which has a $100 million marketing campaign behind it, caused the app to crash.

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the graph

RBC Capital’s US head of equity strategy Lori Calvasina argues that equities can and have placed in big funds even amid falling earnings forecasts, with her chart below showing those moments in history. While Calvasina remains concerned that the 2022 and 2023 EPS forecasts could result in a more volatile stock market, she doesn’t think this will lead to a new low for equities.

RBC US Equity Strategy, S&P Capital IQ/ClariFI, CIQ estimates

main quotes

These were the most searched tickers on MarketWatch at 6 am Eastern Time:

Highlighter

security name

AMC,
-6.58%

AMC Entertainment

BBB,
-40.54%

Bed bath and beyond

GME,
-3.80%

GameStop

TSLA,
-2.05%

Tesla

GCT,
+205.99%

GigaCloud Technology

AAPL,
-1.51%

Litter

NIO,
-4.32%

NIO

NDP,
-1.40%

Endo International

AMZN,
-2.86%

amazon

ABY,
-3.51%

Best buy

random readings

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