MS US Equity Strategist, Mike Wilson:
"With our economic team's new Fed forecast for the end of QE, 4 rate hikes and the beginning of balance sheet normalization this year, our call for falling valuations is likely to happen faster and more broadly than our prior forecast. With earnings growth back-end loaded, this raises the risk for first half of the year...our base case year-end target for the S&P 500 is 4400.
...correlation between NDX performance and change in the 10-year real yield is currently -0.5, about as low as it's gotten in this post-covid recession period. This correlation typically remains around -0.5/-0.6 for a couple of weeks before trending higher post declines to these levels. We think this fits with our narrative that rates will become a less important determinant of equity index returns over the next few weeks and earnings revisions take center stage. That's not to say rates won't matter, just less so."
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