Svmuu News: Andrew Heitz, head of global fixed-income research at Morgan Stanley, said the bank is closely monitoring three major obstacles that could cause stock markets to stumble this summer; historically, summer is typically the season when stock markets perform strongest.
The first major risk is a resurgence of conflict in Iran. Heitz said, “The U.S. Strategic Petroleum Reserve has fallen to a historic low, and if the conflict escalates again, this could weaken its ability to absorb shocks.”
The second major risk is interest rate hikes by the Federal Reserve. Heitz pointed out that the expectation that the Federal Reserve will keep interest rates unchanged through the end of the year is one of the key pillars supporting the current stock market bull run. “The risk is that this assumption may be wrong, and that this error could become apparent very soon. Of course, there is a view that if the Federal Reserve is concerned about inflation, it should not delay action.”
Third is the weakening outlook for AI capital expenditures. Heitz said, “The risk is that second-quarter earnings reports may reveal a more cautious approach to spending, perhaps because the stock prices of some companies that have invested heavily in AI have recently underperformed.Given that current growth and earnings outlooks are highly correlated with AI, and that investors favor AI-related stocks, this situation poses a risk.” (Jin Shi)