Financial services giant Morgan Stanley says that the US economy has incredible upward momentum and that a stock market correction is highly unlikely.
In a new interview on CNBC Television, Dan Skelly, Morgan Stanley’s wealth management managing director, says that the artificial intelligence (AI) narrative is driving the US economy, holding back expected periods of consolidation.
“We’ve blown past the seasonally weak period. So I think that was the time frame. Everyone was expecting that pullback. So it’s telling you a couple of things. First, the economy continues to have a tremendous amount of momentum. We saw that in GDP (gross domestic product) revisions this week.
The AI supercycle continues to power the big mega-cap tech parts of the market as well. So we would just say we’ve been due for a consolidation. Although the momentum in the economy and the AI story continues to suggest it won’t be a huge correction.”
Skelly goes on to note that Morgan Stanley rejects the notion that the market is currently in a bubble.
“If you look at history going back something like 50 years, we’ve seen five bull markets since 1950. And in that period the average length is about eight years. So we’re two and a half plus years since the ChatGPT lows in October, November of 22. So we don’t think we are close to a bubble-like condition…
Back in 1999, the technology sector, the Nasdaq, was something like 50% above its 200-day moving average. Today, the Nasdaq is trading about 12% above that moving day average, so it’s nowhere near as extended as it was in that prior cycle.”
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