Morgan Stanley Says Fed Liquidity Is Stanching S&P 500 Bleeding
- Having faith in central banks is a lesson learned last year
- Benchmark index seen having a shot at 3,500 in the first half
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As rising tensions in the Middle East upend the rally that took U.S. stocks to record highs, Morgan Stanley is offering some words of comfort to bulls.
The flare-up is unlikely to knock down the S&P 500 by more than 5% because the Federal Reserve and other major central banks are injecting money in the financial system, according to the firm’s strategists led by Mike Wilson. The Fed, Bank of Japan and the European Central Bank are expanding their balance sheets by a total of $100 billion a month while their counterpart in China last week just trimmed the amount of cash that lenders must hold in reserve.