Morgan Stanley's investment chief says stocks are getting expensive again, and traders should be careful buying on positive news

Bryan R Smith

  • Morgan Stanley’s Mike Wilson told CNBC on Thursday that the US is in a bull market, but investors should avoid “chasing” positive news and buying stocks at expensive entry points.
  • “You still need to be disciplined on your valuations, this is not back in March and April when everything was cheap,” said the chief investment officer. “Things are getting expensive again, and you need to be careful of that.” 
  • He also said investors got “carried away” on Monday when Pfizer’s vaccine announcement sent major indices to new all-time highs.
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We’re in a new bull market, but that doesn’t mean it’s time to blindly buy stocks, according to Morgan Stanley’s Mike Wilson.

The chief investment officer told CNBC on Thursday that his long-term view for the market has upside, but the S&P 500’s current level hovering around 3600 is “full for the time being” and investors need to watch their entry points.

“You still need to be disciplined on your valuations, this is not back in March and April when everything was cheap,” said Wilson. “Things are getting expensive again, and you need to be careful of that.”

The CIO said that investors got “carried away” and entered the market at bad entry points on Monday when major indices reached all-time highs following Pfizer’s vaccine announcement. Investors don’t have to sell stocks on news like this, Wilson said, but they should avoid “chasing” positive news because the risk-reward at market’s current high levels isn’t attractive.

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He added that the S&P 500 could easily go down in the short-term if the pandemic continues to deteriorate.

Along with his advice to investors to be careful with their entry points, Wilson told them to adopt a barbell strategy, with exposure to both growth stocks and stocks that hinge on the economic reopening, cyclical stocks.

“The story from here in the market is going to be one of earnings, this year has been about multiple expansions which typically happens when you have a recession,” he said. “Then the market looks forward and it becomes a story of owning stocks where the operating leverage and the earnings are going to be greatest, and that still favors these pro-cyclical parts of the market.”

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