S&P 500 Index: Primed for a correction? – Morgan Stanley

In the view of the analysts at Morgan Stanley, the S&P 500 Index looks vulnerable, as it is due for a correction over the coming weeks.

Key quotes

“The S&P500 has been surging mainly thanks to a handful of strong gainers.

Thus, its vulnerable to shocks, particularly rising rates.

The drive higher due to the few is nothing new.

We expect a growth scare to be followed by a rate scare over the next weeks/months that could finally give us the first tradable correction in the major US equity indexes.

Could begin imminently.

More stimulus from Congress (in a range of $2 to $2.5 tln) if economic reopening stalls may spur a sharp increase in long-dated rates.

Market is not prepared for this. “