World Economy

S&P 500 Target Cut as Recession Fears Rise

S&P 500 Target Cut as Recession Fears Rise
S&P 500 Target Cut as Recession Fears Rise

Morgan Stanley strategists are growing increasingly concerned about the risk of a global recession, slashing forecasts for all major equity markets and advising investors to sell stocks that have recently rallied.

In a report out on Monday, the bank’s global strategy team cut its 12-month target for the S&P 500 index to 2,050 from 2,175, indicating the US benchmark over the next year only will rise 1.4% from its close of 2,022.19 on Friday, MarketWatch reported.

This comes after the index rallied 8.4% over the past month, driven in part by a rebound in oil prices and upbeat economic data from the US.

However, there’s nothing to indicate the rally will continue, neither in the US or elsewhere, according to the Wall Street bank.

“Weaker growth forecasts and rising political risk lead us to close our positive tactical stance and lower exposure in global equities,” the analysts said in the note. “The probability of a global recession has risen.”

Other big bank strategists also have been dialing back their predictions for US stocks.

For 2016, Morgan Stanley now sees the US economy growing by 1.7%, down from a previous forecast of 1.9%. The eurozone is expected to grow by 1.5%, down from 1.8%, while the outlook for emerging-market economies was cut to 4% from 4.4%.

This leaves little good news for investors in the stock market. Apart from dropping its S&P forecast, the bank also cuts it target price for the MSCI Europe index to 1,300 from 1,500 and lowered the MSCI Emerging Markets outlook to 735 from 850.