The hot summer of the stock market has turned into a swoon. Where is he going next?

“There is the potential for an earnings recession, which means you have a few quarters of negative earnings growth,” said Mike Wilson, chief U.S. equities strategist at Morgan Stanley, who believes the sell-off could continue until at the end of the year. “The risk of that happening is increasing. “

Of course, jokers could turn the market upside down. Positive news about Covid treatments or cases can spark excitement, just as Merck’s announcement of an antiviral pill to treat Covid-19 did on Friday. The same could be done in Washington with an agreement on increased spending, which could offset slower growth.

Mr Wilson also said he was closely monitoring the behavior of retail investors. The millions of individual traders who have flooded the stock market over the past year have helped keep stocks higher. Market meltdowns met with a rush of traders eager to “buy the downside” – but that was not the case in September.

Katie Melanson, who works in insurance and lives outside Seattle, has seen her business earnings for the past few years drop to $ 12,000 from around $ 20,000. And she’s not buying yet.

“I just hold it in cash,” Ms. Melanson, 27, said. “I think there is still a little left to drop.”

Last year, she said, she saw gains of around 56% on her brokerage account. “It was obviously great when everything was going up, up, up, “ Mrs. Melanson said. “It’s definitely a bummer to see it go down.”

Morgan Stanley’s Mr Wilson thinks these new investors’ reaction to the disappointment could help determine how quickly the market is turning around.

“We have a lot of new participants over the past year due to Covid and people who are at home and have money in their pockets,” he said. “They learn, like all of us, that the markets go up and down. “

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